8 best short-term investments in 2025
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If you’re looking to invest money for the short term, you’re probably searching for a safe place to stash cash before you need to access it in the not-so-distant future. Interest rates remain attractive with many short-term investments offering solid yields.
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The best short-term investments are generally considered safer than long-term investments. Many of these short-term investments help to ensure you'll have access to cash when you need it, instead of relying on a potentially risky investment.
What is a short-term investment?
If you’re making a short-term investment, you’re often doing so because you need to have the money at a certain time. If you’re saving for a down payment on a house or a wedding, for example, the money must be at the ready. Short-term investments are those you make for less than three years.
If you have a longer time horizon — at least three to five years (and even longer is better) — you can look at investments such as stocks. Stocks offer the potential for much higher returns. The stock market historically has risen an average of 10 percent annually over long periods, but it is volatile. A longer time horizon gives you the ability to ride out the ups and downs of the stock market.
Overview: Best short-term investments in 2025
1. High-yield savings accounts
Overview: A high-yield savings account at a bank or credit union is a good alternative to holding cash in a checking account, which typically pays very little interest on your balance. The bank will pay interest in a savings account on a regular basis.
High-yield savings accounts pay significantly higher interest rates than traditional savings accounts, while still offering safety in the form of FDIC insurance and easy access to your money.
Who are they best for? A high-yield savings account works well for risk-averse investors, especially those who need money in the short term (potentially for an unexpected emergency) and want to avoid the risk that they won’t get their money back.
2. Cash management accounts
Overview: A cash management account allows you to put money in a variety of short-term investments. These accounts are typically offered by brokers and robo-advisors, and some pay competitive interest rates while offering features similar to checking and savings accounts.
Who are they best for? A cash management account gives you a liquid cash account that allows you to access your money quickly and may pay interest on your holdings.
3. Money market accounts
Overview: Money market accounts are another kind of bank deposit, and they usually pay a higher interest rate than regular savings accounts, though they typically require a higher minimum investment, too.
Who are they best for? Money market accounts are great options for those who need to access their money in the near future without any strings attached.
4. Short-term corporate bond funds
Overview: Corporate bonds are bonds issued by major corporations to fund their investments. They are typically considered safe and pay interest at regular intervals, perhaps quarterly or twice a year.
Who are they best for? Bond funds are a solid option for investors who want a diversified portfolio of bonds without having to analyze individual bonds.
They’re also good for individual investors who don’t have enough money to buy individual bonds, and the risk-averse should like them, too.
5. Short-term U.S. government bond funds
Overview: Government bonds are like corporate bonds except that they’re issued by the U.S. federal government and its agencies.
Government bond funds purchase investments such as T-bills, T-bonds, T-notes and mortgage-backed securities from federal agencies such as the Government National Mortgage Association (Ginnie Mae).
Who are they best for? Short-term government bonds are an excellent choice for risk-averse investors who want a very safe investment.
Bond funds are good for investors who want a diversified portfolio of bonds without having to analyze individual bonds.
6. Money market funds
Overview: Don’t confuse a money market mutual fund with a money market account. While they have similar names, they have different risks, though both are good short-term investments.
A money market mutual fund or money market ETF invests in short-term securities, including Treasurys and municipal and corporate debt, as well as bank debt securities.
Since it’s a mutual fund or ETF, you’ll pay an expense ratio to the fund company.
Who are they best for? Money market funds are a good match for those looking to have access to their cash while earning a yield on it in a brokerage account.
7. No-penalty certificates of deposit
Overview: A no-penalty certificate of deposit, or CD, lets you dodge the typical fee that a bank charges if you cancel your CD before it matures.
CDs are time deposits, meaning when you open one, you’re agreeing to hold the money in the account for a specified period of time, ranging from weeks to many years, depending on the term you choose. In exchange for the security of having this money in its vault, the bank pays you a higher interest rate.
With a no-penalty CD, you can enjoy a fixed interest rate (unlike savings accounts, which have variable rates), but also the comfort of knowing you can withdraw your money without penalty.
Who are they best for? Those wanting to maintain access to their cash while earning some interest may find the no-penalty CD useful.
A no-penalty CD may also be attractive in a period of rising interest rates, since you can withdraw your money without paying a fee and then deposit it elsewhere for a higher return.
8. Treasurys
Overview: Treasurys come in three varieties — T-bills, T-bonds and T-notes — and they offer the ultimate in safe yield, backed by the strong credit rating of the U.S. federal government. But it’s the T-bills that are the short-termers, with a maturity of up to a year.
Who are they best for? Buying individual Treasurys is better for investors who know exactly what kind of bond they want, because the risks and rewards differ by bond. Some investors may be better off buying a government bond fund, while others might opt to buy specific securities, depending on their needs.
Comparing the best investment options for short-term money
| When you need the money | Investment options | Potential interest rate | Risk |
|---|---|---|---|
| A year or less | High-yield savings and money market accounts, cash management accounts | 3.7+ percent | Low risk and accounts are backed by the FDIC. |
| Two to three years | Treasurys and bond funds, CDs | 3.7+ percent | Bank products and Treasurys are safest, corporate bond funds slightly less so. |
| Three to five years (or more) | CDs, bonds and bond funds, and even stocks for longer periods | up to 4.2 percent (or much more if you’re investing in stocks) | CDs and bonds are relatively low risk compared to stocks, which can fluctuate and are high risk. |
What good short-term investments have in common
Good short-term investments may have many things in common, but they are typically characterized by the following three traits:
- Stability: Good short-term investments don’t fluctuate too much in value, as most stocks and some bonds do. The money will be there when you need it, and is often protected by FDIC insurance.
- Liquidity: A good short-term investment usually offers high liquidity, meaning that you can access your cash quickly. (In the case of CDs, you can always redeem the CD, though generally you'll pay a penalty unless you opt for a no-penalty CD.)
- Low transaction costs: A good short-term investment doesn’t cost a lot of money to get into or out of.
These features mean that your money will not be at risk and will be accessible when you need to use it, which is one of the major reasons to have a short-term investment.
In contrast, you can earn a higher return on long-term investments but must endure more short-term volatility. If you need to pull your money from a long-term investment, the risk is that you end up selling your investment at a loss. Ideally, you hold off selling until the investment is doing well.
Short-term investments: Safe but lower yield
The safety of short-term investments comes at a cost. You likely won’t be able to earn as much in a short-term investment as you would in a long-term investment. If you invest for the short term, you’ll be limited to certain types of investments and should likely steer clear of riskier assets such as stocks and stock funds. (But if you can invest for the long term, here’s how to buy stocks.)
Short-term investments do have a couple of advantages, however. They’re often highly liquid, so you can get your money whenever you need it. Also, they tend to be lower risk investments than long-term investments, so you may have limited downside or even none at all.
Tips for investing money for five years or less
If you’re investing money for five years or less, you should have a different process than if you're investing with a time horizon of decades. Consider the following tips for short-term investing:
- Focus on safety. In general, if you’re investing for the short term, you should focus on safety rather than return. You want your money to be there when you need it. (With a long-term investment, your portfolio likely will experience ups and downs, but you have the time to wait until it's on an upswing before you sell and withdraw your money.)
- A little extra return may not be worth the extra risk. With short-term investments typically offering lower returns, it can be tempting to try to get a little extra return at the expense of a lot more risk. But focus on why you’re investing for the short term, which usually means an upcoming financial goal or emergency savings.
- Pick the investment based on your needs. You might be able to earn a little extra on that CD, but what if you need to access the money before it matures? Calibrate your investment type to your needs.
- Not all short-term investments are equal. Bank products are backed by the FDIC, so you won’t lose any principal as long as you stay within the FDIC’s limits. But market-based products, even safe ones like short-term bond funds, could decline over short periods.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
