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Following can be classified as short-term investment
- Bank Deposits
- Money-market funds
- Fixed Deposit
- Treasury Bills
Advantages of Short Term Investments
- Short-term investments mature in a short time
- Passbook savings accounts and money-market funds
- Fixed Deposits and Treasury Bills
- Short-term investments are comparatively safe because they are guaranteed by the government.
Disadvantages of Short Term Investments
- Short-term investments pay a very low rate of interest, like three to five percent.
- Short-term investments may lose value after adjustments for inflation.
Although your money earns interest in a bank account, inflation can take away its real value. Money in a bank’s savings account and in money market funds often can’t make enough interest to compensate the losses from inflation. That is why it is important to understand the other ways to investments.
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