September 2, 2025
Grow your savings with quick-return strategies, including a few you might not know
Saving for the distant future is an excellent idea, but the near future deserves a strategy too. Short-term investments provide an opportunity for financial goals you can see on the horizon, not decades away.
Assets like these can typically be converted into cash within just a few years, which is why they’re popular among individuals saving for a major purchase or seeking faster growth than a checking account offers. What makes this category especially appealing is the range of choices. Some are familiar, while others, like real estate debt investing, may be entirely new for you.
What Are Short-Term Investments?
Short-term investments include a wide range of vehicles that balance accessibility with growth potential. They are often a great fit for investors looking to earn passive income. The right choice depends on how much risk you’re comfortable with and when you’ll need your money back.
High-Yield Savings Accounts and Money Market Accounts
Bank-based options keep your funds accessible while earning more interest than a standard savings account, making them a good choice for emergency funds, vacation savings, or other short-term goals. Most are federally insured, which protects your principal.
The downside is that even the best “high-yield” rates often trail inflation, so your money may lose buying power over time. Some accounts also carry balance requirements, withdrawal limits, or variable rates that shift without much warning. Here are breakdowns:
High-Yield Savings Accounts (HYSAs):
- Maintaining balances of $500–$1,000 is sometimes necessary to secure the highest APY or avoid fees.
- Dropping below the threshold can reduce your rate or add charges, though newer and online banks tend to be more flexible.
Money Market Accounts (MMAs):
- Opening deposits typically range from $1,000–$2,500, with some institutions requiring $10,000 or more.
- Falling under the minimum may shrink your earnings or trigger monthly account fees.
Certificates of Deposit (CDs)
CDs are fixed-term deposits that provide guaranteed returns at a set interest rate, usually higher than a standard savings account.
Their primary appeal is predictability. You know precisely how long your money is committed and what you’ll earn in return. The tradeoff is access: Your funds are locked for the length of the term. It can range from six months to several years. A few banks now offer “no-penalty” CDs that let you withdraw early without fees, adding a layer of flexibility.
More drawbacks can make CDs less enticing than other short-term investments. Remember, rates are fixed, currently hovering around 4% so if interest rates rise after you’ve locked in, you miss out on potentially higher earnings. And while CDs are generally safe, the returns often lag behind inflation, which means your money could lose purchasing power over time.
Treasury Bills and Bond Funds
Treasury bills, aka T-bills, are short-term government-backed securities that mature in a year or less, usually between four and 52 weeks.
They’re considered one of the safest places to park cash since the U.S. government fully backs them. Investors often buy them at a discount and receive the full face value at maturity, making the return predictable.
Bond funds, on the other hand, pool money into a diversified collection of government and corporate bonds. They can provide steadier income than stocks and are especially popular with conservative investors who prefer stability to chasing higher yields.
The tradeoffs are worth noting. Regarding T-bills, the safety comes at the cost of relatively modest returns, which often lag behind inflation.
Bond funds carry more risk than Treasurys because they can include corporate debt, and their value can fluctuate with interest rates. When rates rise, bond prices typically fall. In addition, unlike individual bonds, bond funds don’t offer a fixed maturity date, which means investors may face market volatility if they need to sell early.
Real Estate Debt Investing
Investment platforms like Groundfloor make it possible to invest in short-term loans backed by real estate projects. Instead of buying property yourself, you’re providing funding through notes or loans that earn returns as borrowers pay back. Many investors are surprised to learn that real estate investing can be short-term and provide passive and even residual income, with repayment windows typically ranging from just a few months to a few years.
- Notes usually run 1 to 12 months, offering quick turnaround and the chance to reinvest your money frequently.
- Limited Recourse Obligations (LROs) extend up to 24 months, giving more time for projects to complete while still keeping the horizon short.
- The Flywheel Portfolio operates on a 36-month term, bundling multiple projects into a portfolio that pays out once the cycle finishes.
One of the advantages of debt investing is its clarity. Each loan comes with a defined term, expected repayment schedule, and interest rate, so you can expect how your money will perform. Because real estate secures these loans, there’s tangible collateral backing the investment, which can help offset some of the risk.
Investors also value the flexibility to match loan terms with their goals—whether that means a quick six-month payoff or a steadier multi-year commitment. Returns can vary, but they often come in higher than what you’d find with savings accounts, CDs, or even many bond options, making short-term debt an attractive piece of a broader investment strategy.
Cash Management Accounts
Cash management accounts (CMAs) are brokerage-style accounts that offer the flexibility of checking accounts with the earning power of savings. To put things simply, they allow you to keep money accessible for everyday use while still collecting interest.
Some CMAs also come with perks like ATM fee reimbursements, debit cards, or the ability to automatically sweep excess cash into higher-yield products. For people who want both liquidity and a modest return, they can be a convenient middle ground.
However, as always, the tradeoffs are worth considering.
Cash management accounts don't always come with direct FDIC protection. That is because brokerages that offer them are not banks. To cover customer deposits, many providers partner with FDIC-insured institutions, which extends protection to the cash portion of your account. While it's a valuable safeguard, it is not always identical to what you'd get from a standard bank account.
Before moving large sums into a CMA, check whether your money is insured through the FDIC, the SIPC, or both, and be clear on which parts of the account, cash deposits or investments, are covered.
Additionally, interest rates can fluctuate depending on market conditions, which means your earnings aren't guaranteed. Also, you should know that many CMAs impose minimum balance requirements, monthly charges, or transaction limits. To sum it all up, they're flexible and valuable, but not always as straightforward or as risk-free as a savings account.
Related Article: Real Estate Syndication Explained
What Is the Best Short-Term Investment?
The “best” choice often depends on when you’ll need your money. Suppose your timeline is a year or less; safety and liquidity matter more than yield. If you have a few years, you can branch out into higher-return investments that require a little more patience.
Here’s a quick guide:
|
Investment Type |
Typical Term |
Key Advantages |
Main Drawbacks |
|
High-Yield Savings / MMAs ➡️ |
On demand |
Liquidity, FDIC insured |
Rates trail inflation |
|
Certificates of Deposit ➡️ |
6 mo – 5 yrs |
Predictable, safe |
Locked funds, fixed rate |
|
T-Bills & Bond Funds ➡️ |
4 wks – 1 yr / varies |
Low risk, steady income |
Low returns, rate risk |
|
Real Estate Debt ➡️ |
1–36 months |
Higher yields, real collateral |
Less liquid |
|
Cash Mgmt Accounts ➡️ |
On demand |
Flexible, perks |
Coverage varies, fees |
Short-Term Real Estate Loans as a Path to Growth
Short-term loans aren’t usually the first thing people think of when they hear “investing,” but they’re an option worth considering. These loans, also referred to as debt investing, offer investors a way to earn interest on a set schedule, with clear start and end dates. Instead of waiting for stock prices to climb, you’re putting money into projects that repay as the work progresses.
Remember, what sets real estate-backed loans apart is the collateral. Because each loan is tied to a property, there’s a tangible asset behind the investment. That structure can help reduce risk compared to unsecured lending, where defaults leave little to recover.
Risks of Short-Term Investments
The skinny: Every investment carries some level of risk, even if it appears as a safe bet. Understanding the following will help you pick the type of investment that works best.
- Market volatility: Stocks and bond funds can fluctuate, even in the short term.
- Interest rate changes: When rates rise, existing bond prices can fall.
- Liquidity restrictions: CDs and real estate debt can lock up your funds for a set time, from months to years.
- Credit risk: Borrowers may default on loans, though platforms like Groundfloor manage risk by securing investments with real estate collateral.
Your big takeaway here is being clear-eyed about these risks to avoid surprises and match the right product to your financial goals.
Related Article: Alternative Real Estate Investments to Build Wealth
How Much Do You Get Taxed on Short-Term Investments?
Taxes are an essential part of the picture. In most cases, earnings from short-term investments are taxed as ordinary income, meaning they fall under the same brackets as your wages or salary.
Ordinary income applies to interest from savings accounts, CDs, and real estate notes. Returns from REIT investing are also usually taxed as ordinary income, though some may qualify for deductions depending on the structure.
Some investments may come with special tax treatments or reporting requirements, so it’s essential to read the terms carefully. And because everyone’s financial situation is unique, it’s always best to consult with a tax professional before making decisions.
Building a Balanced Short-Term Strategy
For short-term investments, consider focusing on when you’ll need your money, how easily you can reach it, and whether any option shared here fits your financial goals.
As a reminder, they should serve as a middle ground between day-to-day saving and long-term growth, while keeping your cash working instead of standing still.
By combining safer options, like high-yield savings accounts, with higher-return opportunities, such as real estate notes, you can find a balance that suits your preferences.
Get ready to explore short-term real estate investing for yourself. Open an account with Groundfloor.
