Best Short-Term Investments: The Safest Accounts for Your Money

Are you looking for a safe place to store your cash while earning a competitive interest rate? Perhaps you’re on the sidelines waiting for an opportunity to get into the markets.

While you should always pursue a long-term investment strategy if you have decades left in your investing career, many investors are taking advantage of recent high inflation and interest rate hikes by increasing their exposure to low-risk, short-term investments.

In this article, I’m sharing the best short-term investments for you to consider right now.

Table of Contents
  1. What’s Considered a Short-Term Investment?
  2. Best Short-Term Investments
    1. 1. High-Yield Savings Accounts
    2. 2. Money Market Accounts
    3. 3. Cash Management Accounts
    4. 4. No-Penalty CDs
    5. 5. Real Estate-Backed Notes
    6. 6. Short-Term Treasury Bills
    7. 7. Inflation-Indexed Bonds
    8. 8. Money Market Mutual Funds
    9. 9. Municipal Bonds
    10. 10. Short-Term Corporate Bonds
    11. 11. Small Business Bonds
  3. FAQs
  4. Final Thoughts

What’s Considered a Short-Term Investment?

Short-term investments usually have an investment period of two years or less, and they often share the following traits:

  • High liquidity: You can usually sell or withdraw your position within a few days or weeks penalty-free and at face value.
  • Minimal risk: Most short-term investments are considered “risk-free” thanks to being federally insured, having a short investment period, along with an excellent financial credit rating. Full disclosure, every investment has some risk, but most short-term assets allow you to sleep peacefully knowing that your principle investment is safe.
  • No fees: Many don’t charge transaction fees or monthly service fees. If they do, it’s minimal. However, your investment income may be fully taxable in a non-retirement account.

The various investments, which we’ll explore below, have different yield potentials, risk levels, and redemption options. 

Best Short-Term Investments

The following investments are considered among the highest-yielding products with the lowest risk over the short term.

1. High-Yield Savings Accounts

A high-yield savings account can earn significantly more than accounts offered by traditional brick-and-mortar banks. Some of the top-yielding platforms currently earn 5% or more compared to 0.10% or less at a big bank, though the interest rate is variable and can change without notice.

The best part is that you still get up to $250,000 in FDIC Insurance benefits. 

Most accounts don’t have any minimum balance requirements, although you may have to deposit $100 or more to get started. In addition, online accounts require you to transfer funds from a linked account through your bank’s website or mobile app. You can’t deposit funds in person.

High-yield accounts offer plenty of liquidity as your deposits are available for withdrawal within a few business days. However, the number of free withdrawals may be limited, so you won’t want to use this account for paying bills. A rewards checking account is a better place for spending money.  

Why We Like High-Yield Savings Accounts

  • Earns a competitive interest rate
  • No monthly service fees
  • Little or no balance requirements
  • No minimum investment period
  • Up to $250,000 in FDIC Insurance

Potential Risks

  • Variable interest rates
  • Potential lower yield than CDs and fixed-income investments

2. Money Market Accounts

Banks also offer money market accounts, which share many similarities to online savings accounts, including FDIC insurance, higher-than-average interest rates, and low or no balance requirements.

A primary difference is that you can request a debit card to make ATM withdrawals or pay for purchases. As a caveat, you’re limited to six monthly withdrawals, so a free checking account is still better for day-to-day spending.

Money market accounts earn a competitive interest rate, but you should compare the yield to high-yield savings accounts to see which one has the highest rate. You may consider opening one of each to transfer your funds to the higher-yielding product. The rates are variable for savings accounts and money market accounts.

Why We Like It

  • Competitive interest rate
  • No account service fees
  • Low or no minimum balance requirements
  • You may receive a debit card for withdrawals
  • Up to $250,000 in FDIC Insurance coverage

Potential Risks

  • Variable interest rates
  • May have a lower yield than savings accounts and CDs
  • The debit card can make withdrawing funds too easy

3. Cash Management Accounts

A cash management account has many overlapping traits as a high-yield savings account, but it can be a better fit if you want to keep your uninvested cash and stocks with the same platform instead of transferring it to an online bank.

Some of the best account benefits include:

  • High-interest rates
  • Can be insured up to $5 million (varies by platform)
  • Unlimited monthly withdrawals
  • Optional debit card
  • Zero account fees

Your interest rate should be competitive with high-yield savings accounts. In addition, unlike the six withdrawals per month limit inflicting most high-yield accounts, you can also make unlimited monthly withdrawals and transfers.

One key difference is that cash management accounts offer “passthrough” FDIC coverage or SIPC insurance exceeding the standard $250,000 insured deposits threshold. These accounts offer higher coverage limits as they have multiple partner banks, but the platform you open an account with may not be federally insured.

Additionally, high-net-worth households that already bank with a passthrough insurance partner will have a lower insurance limit. This is because any banking account you have directly from that partner reduces the $250,000 of coverage per bank limit with your cash management account.

Some of the best cash management providers include:

Many robo-advisors offer cash management accounts – which is beneficial if you prefer managed portfolios. In most cases, you don’t need a brokerage account to open a cash management account.

Why We Like Cash Management Accounts

  • Competitive yields
  • Unlimited monthly withdrawals
  • Can quickly transfer funds to investment accounts
  • No monthly fees
  • Low balance requirements
  • High account insurance limits

Potential Risks

  • The provider might be SIPC-insured but not FDIC-insured
  • Passthrough federal insurance is from partner banks
  • Account balances at partner banks reduce your total FDIC Insurance limits
  • May require opening an investing account first

4. No-Penalty CDs

A no-penalty CD can provide more peace of mind than a high-yield savings or money market account, as you have a guaranteed interest rate for the investment term so that you can forecast your total income. 

At the same time, you can usually withdraw your funds beginning seven days after the funding date without sacrificing your earned interest.

Most no-penalty CDs have a maturity date of 12 months or sooner, although some banks offer weird CD term lengths from one month to 15 months.

So, you can park your cash in this short-term investment vehicle with your desired rate and maturity date. If you find a better investment, you can redeem your CD early without any penalties and start earning a higher return.

But, if interest rates decrease, you can continue squeezing out a higher yield until the maturity date. When your CD matures, your redemption options are to either cash out or renew for a similar term but at the then-current interest rate.

Despite the flexibility, negative tradeoffs include a potentially lower yield than 12-month term CDs with a similar interest rate. If you don’t anticipate needing your funds before maturity, locking up your cash for a specific term is an easy way to get a higher yield.

Why We Like No-Penalty CDs

  • Redeem as soon as after the first seven days
  • No early redemption penalties or fees
  • Low deposit requirements
  • Earn a fixed interest rate until maturity

Potential Risks

  • Yields can be lower than traditional CDs or brokered CDs
  • The interest rate at renewal can be lower if rates decrease 

Related: Best CD Rates Today

5. Real Estate-Backed Notes

Short-term real estate notes can help you enjoy a higher yield than an FDIC-insured high-yield savings account or even a similar-termed CD. This is because the issuer uses these notes as a “bridge loan” to pre-fund real estate deals before long-term investors can buy shares. 

Like CDs, once the investment term ends, you can withdraw your funds or re-invest in another offering. 

EquityMultiple Alpine Notes

Currently, investors can earn from 5.5% to 7.0% annualized interest through an EquityMultiple Alpine Note. The minimum investment is $5,000, with terms of three months or six months.

You may earn an above-average yield, but Alpine Notes carry more risk as they are backed by commercial real estate. If a real estate deal falls through, you can lose your investment principal or earn a reduced return. 

Additionally, they are not FDIC-insured, but EquityMultiple offers “First Loss Protection,” meaning the crowdfunding platform assumes 100% of the loss before investors if a note defaults.     

One of the most significant drawbacks is that you must be an accredited investor to purchase Alpine Notes.   

Why We Like Real Estate-Backed Notes

  • Investment terms as short as three months
  • Can earn a higher yield than savings and CD accounts
  • First Loss Protection reduces the risk for investors
  • Lower minimum investment than long-term real estate offers

Potential Risks

  • Less liquidity than cash accounts
  • Not FDIC-insured
  • Backed by commercial real estate

Related: Best Investments Opportunities for Accredited Investors  

6. Short-Term Treasury Bills

U.S. Treasury Bills (T-Bills) carry minimal risk and can have a higher yield than longer-term government or corporate bonds.

T-Bills have a maturity date of 4, 8, 13, 17, 26, and 52 weeks. Auctions are held weekly for most bonds and monthly for 52-week terms at TreasuryDirect. The minimum investment is $100 per note, but you may need to buy $1,000 per auction.

While buying individual bills is simple and the returns predictable, investors can also gain exposure to this asset class through T-Bill ETFs inside their investment account. You won’t have to constantly purchase new bills, while the fund provides exposure to the latest yields for your desired maturity duration.

Some of the short-term T-Bill ETFs to consider researching include:

  • SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL)
  • Goldman Sachs Access Treasury 0-1 Year ETF (GBIL)
  • US Treasury 6-Month Bill ETF (XBIL)

Most bond index funds have an annual expense ratio of 0.15% or lower. Further, most investing apps don’t charge trading commissions and may allow fractional investing to invest small amounts of money at a time. 

A potential downside to buying bond funds instead of actual bonds is that the ETF share price can differ from the dividend yield. So, it’s possible that your investment performance can be negative if the fund’s share price decreases more than the yield.

Why We Like Short-Term Treasury Bills

  • Can have higher yields than longer terms
  • Low minimum investment
  • Minimal fees
  • Can buy directly or through passive index funds

Potential Risks

  • Share price fluctuations impact fund performance
  • Not FDIC-insured
  • Selling before maturity can result in fees

7. Inflation-Indexed Bonds

Rising inflation is hard on long-term bond investments that are a traditional shelter for conservative investors. In addition, long-term bonds historically outperform short-term investments with a higher yield. But that’s not the case during an inverted yield curve.

Inflation-linked bonds can provide higher yields and the flexibility of holding for a brief or extended period.

Series I Bonds offer the most flexibility, and you own the physical bond. The minimum holding period is one year, and they mature after five years. Early redemptions result in a three months interest penalty. 

You can purchase I Bonds from the U.S. Treasury Direct site in $25 increments. The yields adjust semi-annually. Your interest income is subject to federal taxes but exempt from state and local.

Treasury Inflation-Protected Securities (TIPS) are another way to get exposure to bonds with yields that can rise with the inflation rate. You can buy individual bonds from Treasury Direct, but the minimum term is five years. 

Instead, buying a TIP ETF such as the Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP) through your online brokerage or tax-advantaged retirement account can be a better option. 

Why We Like Inflation-Indexed Bonds

  • Can have higher yields than standard investment-grade bonds
  • Yields can be higher when core inflation increases
  • Low minimum investment
  • Can purchase ETFs through a brokerage or retirement account

Potential Risks

  • Yields decrease as inflation cools
  • May need to hold for at least one year
  • Mutual funds and ETFs may perform differently than actual bonds
  • Not FDIC-insured

8. Money Market Mutual Funds

If your brokerage account has a sizable cash position that you don’t plan to invest in the markets in the near future, a money market mutual fund can help you earn a higher yield. You get to keep the cash in your portfolio, earn a higher rate, and enjoy ample liquidity.

Money Market mutual funds invest in low-risk, short-term securities such as government and corporate assets and tax-exempt municipal bonds and are easier to buy than individual bonds.

Legacy brokers, such as Schwab, Fidelity, or Vanguard, provide in-house money market funds with minimum investments as low as $0 and no transaction fees. There are multiple fund options, and you can quickly compare the 7-day yield to help choose your best option.

Shares usually trade at a static $1, yet shares can trade at a discount price. If you sell during this uncommon event, you can lose money. 

Yields are variable, so you will need to monitor the current rate regularly and be ready to switch funds to chase a higher return. Having multiple funds can diversify your portfolio as these products are not FDIC-insured like a savings account or the similarly-sounding money market account. 

You will usually need to use a discount brokerage instead of a micro-investing app to buy a money market fund. However, if your brokerage doesn’t offer a cash-equivalent fund, transferring your uninvested cash to a federally-insured high-yield savings account is a good alternative.

Why We Like Money Market Funds

  • Earn competitive rates on uninvested cash
  • Low minimum investment
  • Low risk
  • High liquidity with no minimum holding period

Potential Risks

  • Variable yields
  • Not FDIC-insured (although they invest in regulated assets)
  • Cannot select investments held within the fund
  • The share price may decline and result in investment losses

9. Municipal Bonds

Investors in high-tax states may look to add municipal bonds to earn tax-exempt returns. First, these bonds are usually exempt from federal income taxes. 

You should buy bonds from your home state to reap the most tax benefits. It’s possible to avoid state and local taxes on qualifying investments as a loyalty benefit. 

Municipal bond ETFs are the best way to get short-term exposure as the investment minimum is low, and you can get exposure to several bonds with different maturity dates. 

It’s also possible to invest directly, but this method can require a long-term investment horizon to realize a profit. In addition to comparing maturity dates, you should review the credit rating of the agency. 

It’s also good to determine if a bond is revenue-backed (paid off from customer payments such as utility bill payments) or tax-backed (paid off from tax revenue).

Why We Like Municipal Bonds

  • Are usually exempt from federal taxes
  • Home state bonds can be exempt from state and local taxes
  • Multiple investment options

Potential Risks

  • Potential default
  • Can require a long-term commitment
  • ETFs have a fluctuating share price

10. Short-Term Corporate Bonds

Investment-grade corporate bonds can also provide reliable yields. The income potential can differ from Treasuries and government bonds and are worth keeping an eye on. 

A short-term corporate bond ETF or mutual fund is the best option for most investors, thanks to the low investment minimums and ease of access. These funds usually hold a variety of bonds with a duration of five years or less. 

You can buy or sell shares on demand as they trade like stocks with high liquidity. This flexibility comes in handy as corporate bonds may have lower yields than bank deposit accounts and government-backed bonds with a short duration.

Three ETFs to add to your watchlist include:

  • Vanguard Short-Term Corporate Bond ETF (VCSH)
  • iShares 0-5 Year Investment Grade Corporate Bond ETF (SLQD)
  • SPDR Portfolio Short Term Corporate Bond ETF (SPSB)

Free portfolio management software can help you analyze potential investments and asset allocation to assess your portfolio diversification and risk tolerance.

Why We Like Corporate Bonds

  • Earn dividends from investment-grade businesses
  • High liquidity
  • Many ETF and mutual funds

Potential Risks

  • Yields can trail high-yield savings accounts and Treasury Bills
  • Fund share prices can fluctuate
  • Riskier than U.S. Treasury bonds

11. Small Business Bonds

Small business bonds can earn a higher yield than corporate and government bonds. However, they carry more investment risk as the borrowing business has a significantly smaller balance sheet.

Worthy Property Bonds earn 5.65% APY on collateral-backed loans with a 36-month term, although you can make penalty-free early redemptions. Notes are available in $10 increments and are available to non-accredited investors.

Unlike some peer-to-peer lending platforms that require you to invest in individual bonds which carry more risk, you invest in a general fund to help manage risk. The investment experience is similar to a bank CD, except you can earn a higher return as you’re a direct lender. 

Unfortunately, the bonds are not FDIC-insured and small businesses can be more likely to default before investment-grade corporations or governments. 

Learn More: Worthy Property Bonds Review 

Why We Like Small Business Bonds

  • Can earn a higher yield than short-term CDs
  • Flexible redemption options
  • Low minimum investment

Potential Risks

  • Not federally-insured
  • Can be riskier than high-yield savings accounts or CDs
  • Investors in certain states may not be able to invest through platforms


What are the best short-term investments?

The best short-term investment mostly depends on the current yield, investment term, and risk tolerance. High-yield savings accounts and short-duration U.S. Treasury Bills are the best options for most investors as they have some of the highest yields and are low risk. 

Investors should hold several short-time assets to manage risk and earn different yields that can regularly adjust before an investment matures. For example, you might build a CD ladder to capture the best rate for various terms.

Are high-yield savings accounts or CDs better?

High-yield savings accounts are better when they earn more interest or you need instant liquidity before the CD matures. CDs usually offer higher yields on terms longer than 12 months and buying some of these CDs can help you earn more interest as savings accounts have variable rates that can decrease.

SaveBetter by Raisin makes it easy to compare the highest rates for savings accounts, CDs, and money market accounts. Your assets are FDIC-insured, and the deposit requirements are low.

As a side note, this online banking platform is rebranding as Raisin in mid-2023 but will continue to have high-yield offers with zero service fees.

How much should you hold in short-term investments?

Consider investing cash that you plan on using for expenses or other investments within the next five years. You may decide to increase your exposure to short-term assets during times of uncertainty when the upfront cash yield is higher than the long-term potential. 

Where can I put my money for three months?

Federally-insured high-yield savings and money market accounts are the best places for most investors as they have competitive yields while letting you make on-demand withdrawals. Short-duration Treasury Bills with a 4-week or 8-week duration are also worth considering.

Final Thoughts

As you can see, there are plenty of ways to earn a solid return on your short-term cash, especially during a time when interest rates are higher than they’ve been in years. With most of these options, the minimum investment requirement is very low, and you can withdraw your money quickly when required.

Whether you’re a short-term investor or you’re just waiting for a better long-term investment option, short-term investments can help you move forward without taking much risk.

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