Understanding rates of return on low-yield, short term investments

Before we take on the topic of the best short-term investments, let’s take a moment to set some expectations. Before you commit to any course of action, consult a professional financial manager to determine the best course for your investment plan.

The investments we’re going to discuss here are marginally beneficial in the shorter term. That said, they’re not going to make you rich. But with the right strategies in place, you can make your money do more heavy lifting that it would if left unattended. Generally, the interest rates on returns will vary from under 1% up to 1.75% depending on the type of investment asset and the terms offered.

With that in mind, let’s discuss some of the best options for this type of investment strategy. 

Certificate of Deposit (CD)

A CD is a time-defined investment where you deposit a sum of money for the promise of a heightened return on investment (up to 3% in some cases). CDs range from 3 to 10-year terms depending on the arrangement you reach with your bank.

Pros: CDs are basically a guaranteed return on investment, and it’s easy to calculate how much you’ll profit from your investment given you honor the terms.

Cons: The terms of CDs are restrictive and withdrawing your funds early means penalties. If you can’t afford to set the money aside for a prolonged period, a CD might end up costing you more than it’s worth.

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Rewards Checking Accounts

A rewards checking account is a novel way to get cashback on purchases in lieu of a favorable interest rate.

Pros: You can apply certain discounts each month or each quarter to certain retailers you may do business with. The savings vary depending on the arrangement between your bank and the company issuing the cashback credit.

Cons: This is a benefit or reward, not a return on investment. These cashback rewards are perks that allow you to get savings — only if you choose to shop at certain stores.


Bonds are generally time bound for at least two years but may offer higher rates of return in comparison to CDs. Bond funds are managed investments, so they aren’t risk-free but generally see average rates of returns from 2.5%-3.1%.

Pros: You don’t have to commit to a very long period of investment as you would with a CD and the rate of return could be higher when you compare bond performance against lower yield CDs.

Cons: With any investment into a managed fund, you run the risk of loss. Given that the average rate of return is modest, so is the amount of risk. So if you are risk-averse and can’t afford to lose money, this investment might not be a good fit for you.

Robo Investing

Services and savings apps like Acorns or Betterment allow you to automate savings and investing through apps that connect to your bank to make regular deposits into their managed funds.

Pros: You can choose the risk profile of your portfolio from 100% stocks at the risky end to 100% bonds at the most conservative end. You get to be in control of the level of risk you tolerate.

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Cons: There’s always risk involved with investing in stocks, mutual funds or bonds. If you want a guaranteed return on investment, this might be too risky for you.

Paying Off Debt

If you’re making monthly payments toward large credit cards with high-interest rates, aggressively paying off debt is a great way to shorten the lifespan of your debt accounts while increasing the liquidity of your finances for the longer term— we’re talking about more money back in your pocket once your debts are paid off. The money you save in interest would equate to hundreds or thousands of dollars — not to mention getting out of debt more quickly.

Consider Credit Counseling

Though working with a credit counselor won’t necessarily help you manage short-term investments, it may be a wise strategy if overwhelming debt is getting in the way of your savings goals.
If you’re dealing with credit card debt that feels bigger than you can resolve on your own or you’ve been falling behind on your monthly payments, consider calling a certified credit counselor who can provide practical debt management solutions that work for more than just the short-term.