Short-term investments are temporary financial investments that can be easily converted into cash, normally within 3 years. They work best if you are saving for something that will be happening soon e.g., a wedding, a down payment on a property, or a car.

    When compared with long-term investments short-term investments may have lower rate returns but, they are the best when you are looking into grounding your portfolio and want the flexibility of making money that you can easily have access to when needed. Moreover, short-term investments are low risk, making them a stable option.

    There are different types of short-term investments that are suitable for different budgets. Following are the best short-term investment in South Africa.

    1. Money Market Account

    Money Market Fund is an investment product that is part of the FSCA classification of Collective Investment Scheme which is regulated by the Collective Investment Schemes Control Act.

    Money market is suitable if you only want to invest for a year, need a high level of stability, and require higher returns than bank deposits. The downside is that most money market accounts require a higher minimum investment, making it difficult for some to commit to it.

    How it works is your money gets invested in selected money market instruments that are issued by the government, corporate, and banks. Investment is selected based on analysis of interest rates, inflation, and Reserve Bank policy, and they are typically held until they mature.

    All major banks and investment companies do offer money market as a short-term investment plan. The difference is mostly in the interest rate so, you will have to compare to find the best offer.

    2. High Yield Savings Account

    High yield savings accounts are best for short-term investments as your deposit will accumulate interest.

    High yield savings accounts are the same as standard savings accounts, but they typically pay 20 to 25 times the national average of standard savings accounts. Your money will be safe and for the period it is kept, it will be earning some interest.

    This account is best for emergency funds and is not recommended for saving for large purchases. You may use it to save for a vacation or a party.

    3. Money Market Mutual Funds

    Money market mutual funds may sound like money market accounts, but they have different risks. With Mutual Fund investments, a company uses the money that you put in and invest in short-term securities such as stocks, bonds, and short-term debt.

    As an investor, you will buy shares in mutual funds and each share represents your ownership in the fund and the income it generates.

    Money market mutual funds are not as safe as money market accounts as money can be lost in certain periods due to severe market distress.

    The good thing about mutual funds is that you have access to your money.

    4. Tax-Free Savings Account

    A tax-free savings account will give you the allowance to have your money grow without paying the tax on the growth of your investment, interest, or dividends.

    You can make investment deposits from as little as R100 and you will have the option to access your money whenever you want to.

    5. No Penalty Certificate of Deposit (CD)

    Certificate of Deposit is a product offered by banks and credit unions. It is an insured savings account that has a fixed interest rate for a defined period of time.

    A no-penalty CD gives you the allowance of not paying the fee that a bank charges if you cancel your CD before it matures, meaning you can keep your money for a shorter period without being penalised.

    CD’s normally offer a higher return than what other short-term investments offer.

    You may check with your bank to see if they offer a better CD, if not, you can shop around.

    6. Short-term Corporate Bond Funds

    Major corporates issue bonds which are a collection from different companies, across industries and company sizes to fund their investments.

    Short-term corporate bond funds are not insured by the government but, they are considered safe, and interest gets paid on a regular basis, in most cases monthly.

    It is wise to buy a broadly diversified collection of them so that if there is a poor-performing bond then it won’t affect the overall return that much. Moreover, a short-term fund provides the least amount of risk exposure to changing interest rates, so rising or falling rates won’t affect the price of the fund too much.

    The best time to start investing is now. The small amount you have now can make a huge difference in your finances if you make a smart investment move. Shop around and find an investment plan that works best for your budget. The money you invest today will give you the financial freedom you want for your future.

    If you are looking into considering short-term investments remember to:

    Set your goals – know that short-term investments have lower returns so your goals should align with the returns depending on how long you plan to keep your money.

    Be cautious: the safety of your money should be your number one priority so, be careful of scams.

    Pick an investment based on your needs – the type of investment you opt for should be the best option for what your investment needs are.

    Shop around – different banks and institutions offer different products and plans be sure to do your comparison and go for short-term investments with reasonable returns.

    Understand what you’re investing in – don’t be quick to sign up for anything.



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