How finance folk use it
In finance, short term is how you refer to a period of time that lasts 3 years at the most. Putting your money in investment products that mature within that period or can easily be converted to cash (like money market instruments) is called short-term investing.
Is it good or bad?
Aside from being aware of your risk profile, knowing when you’ll need the money for your goal will help you choose the right product to invest in.
This is because some investments need time to mature or may go through a typical market cycle of ups and downs. Taking your money from them early can mean that you’ll have to pay extra fees, and may lower the potential for returns or even cause you to experience losses to your capital.
What it means for you
Products that are suitable for short-term investing are usually suitable for people with a low tolerance for risk. In exchange for this stability, they don’t usually give very high returns.
Still, if you’ll be needing the money within the next 3 years and you aren’t willing to risk your capital, short-term investments may fit your needs.
