21 Mar 2022 | Edukatips

5 Potential Short-Term Investments for Beginners

You want to invest but aren’t ready yet, hesitant and scared to start? Short-term investments may be the right solution to start. Known for its relatively low-risk yet still making profits over short time period, short-term investments are in popular demand by novice investors.

There are various types of short-term investments, including Money Market Funds. In addition to that, there are many other types of profitable short-term investments. Let’s have a look at the information below!

What are Short-Term Investments?

A short-term investment is an investment in which a lump-sum amount is deposited and managed over a short time period. Both principal and yield can be converted into cash within a relatively short period of time, typically within 1 year.

These investments are typically fixed-income (income over a certain period of time) funds, or can be traded or liquidated. Therefore, short-term investments are varied in types, and moderately profitable, especially to diversify your investment portfolio. Portfolio diversification is an investment strategy in which money are invested in different asset classes to minimize the overall risk of the portfolio.

Types of Short-Term Investments

Here are 5 types of short-term investments that can be your investment option:

1. Deposit

Time Deposit is a savings product in a bank in which funds are deposited over a period of time that will mature on the due date. The deposit rates are fixed rates until it reaches maturity.

In addition, this type of investment is highly secure because it is supervised by the Lembaga Penjamin Simpanan (LPS) with a guarantee of up to Rp2 billion. So, this is a safe and profitable investment option.

2. Mutual Funds 

Mutual Fund is an investment vehicle made up of pool money collected from investors operated by an Investment Manager to generate profits for the investors. It makes it easier for investors as they don’t need to set up strategies to manage their money.

There are various types of mutual fund investments. To find out which type of mutual funds fits your investment profile, you first need to know the risk profile prior to employing the appropriate strategies. BCA presents the Welma app to facilitate mutual fund investments for its customers.

For short-term investments, Money Market Funds become the favorite because investor funds are invested by Investment Managers in deposits and bonds that mature less than a year, making the risk is relatively low compared to other investment products.

3. Government Securities/Surat Berharga Negara (SBN)

SBN is a debt acknowledgement letter issued by the government to fund investors. The initial placement starts from IDR 1 million. In addition, SBN is known to be profitable and safe. It is because both principal and yields are guaranteed by the government within a certain period of time.

The government will pay the proceeds from the pooled funds to the investors in the form of coupons. SBN consists of Government Bonds/Surat Utang Negara (SUN) including ORI and State Sharia Securities/Surat Berharga Syariah Negara (SBSN), which caters to those who wish to invest in a sharia-compliant bond, such as Sukuk. 

Benefits of Short-Term Investments

Many people are interested in short-term investments for the many benefits it offers. The following are the benefits you will get when investing in this type of investment:

  • Faster Return
  • Returns on short-term investments are faster. It usually takes a year or even less. From the profit gained, investors can reinvest in the same instrument to get a larger profit.

  • Flexible Passive Income
  • Many people invest in short-term investments to generate passive income due to its flexibility. Like a mutual fund, you can conduct transactions anywhere through Welma and deposits through myBCA. 

  • Savings for Emergency Use
  • Investments can be a solution for a source of ready cash of an emergency fund. Short-term investments are easy to disburse and have a relatively low risk making it an alternative source of emergency fund.

That’s the types of short-term investments that offer potentials for generating profits. Make sure to know the investment risk profile that suits your investment goals.

If you are ready to invest in mutual funds, now you can conduct the transactions through Welma from BCA. It is very easy to use and you can buy and sell various types and series of investments at competitive prices. Enjoy the ease of carrying out financial transactions with BCA!