Depending on your tolerance for risk, there are many types of investments at your disposal for the short term. If you don't have a high tolerance for risk, you might want to consider a money market fund. A money market fund is one that invests in low-risk government securities such as Treasury bills and commercial short-term loans. Unlike other bank or credit union investments such as certificates of deposit, money market funds are not federally insured and can change in price. These changes are usually minimal, however. Money market funds are highly liquid (meaning they can be converted to cash).
For a short-term investment with very good liquidity, yet with higher returns than money markets, you can invest in short-term bonds. Short-term bonds tend to have regular interest payments, but their prices on the market can fall when interest rates rise.
Growth stocks are stocks from companies with a strong potential for future growth. Their earnings are expected to grow faster than the market average. Earnings of growth stock companies are frequently reinvested into the companies for future development, so they pay few dividends. They usually go up or down in price faster than other types of stocks. Because their market prices are so volatile, they can be an important investment for the short-term speculator.
Another short-term stock investment for speculators is emerging stocks. Emerging stocks are issued by small, rapidly growing companies. Like regular growth stocks, their prices are volatile due to earnings expectations and the lack of information available about them. Speculators investing in emerging stocks are looking for the next big thing. The risks are huge, but so are the potential rewards.
The earnings of value stocks are expected to grow more slowly than average. Value stocks trade at prices below their company values and earnings potential. Speculators investing in value stocks look for undervalued stocks whose prices will eventually jump when the market discovers their true value.
When deciding how to invest, evaluate your investment goals. Do you need to generate income to live on? Are you trying to make additional money for an upcoming purchase? Use short-term investing techniques to meet your short-term investment goals based upon your levels of expertise and risk tolerance.
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