√ Definition of Short Term Investment, Objectives, Types, Examples, Forms, Characteristics, Means
Definition of Short Term Investment, Objectives, Types, Examples, Forms, Characteristics, Means – In this discussion, we will explain about investment. Which includes short-term investment definitions, objectives, types, forms, characteristics, facilities and examples of short-term investments that are discussed in full and light. For more details, please see the review below carefully.
Definition of Short Term Investment, Objectives, Types, Examples, Forms, Characteristics, Means
Let's first look at the meaning of short-term investment carefully.
Definition of Short Term Investment
Before knowing the meaning of short-term investment, it would be better for us to know what investment is.
Investment or investment is a term related to the accumulation of a form of assets with the hope of obtaining profits in the future or the future. According to Economic Theory, investment is the purchase or production of capital goods that are not consumed but are used for future production or production goods.
There are two types of investment, namely long-term investment and short-term investment. In this discussion, we first explain about short-term investments.
Short-term investments are investments that can be immediately disbursed or funded from excess funds temporary in nature owned by a company intended to be held for twelve years or not enough.
Short Term Investment Goals
The objectives of short-term investments are as follows:
- Making it useful excess cash flow temporarily
- Obtain additional funds
Types And Examples Of Short Term Investments
There are several types of short-term investments, but what we provide below are several types of short-term investments that are often used, including:
-
Bank Savings Account
Bank savings are a type of short-term investment that is very simple and easy to cash out, but with the ease of cashing out, savings offer low or small returns. More of these savings accounts do not keep up with inflation so savings cannot be used to store money for a long period of time. -
Deposit Certificate
Certificates of deposit are short-term investments that are often used. When you invest money in the form of a certificate of deposit, you agree not to take/withdraw within a certain period of time with higher profits or rewards. The time span for a certificate of deposit is between 3 months and a maximum of about 5 years. Often these certificates of deposit are insured so as an investment, it is a safe short term investment and the returns are reasonable. -
Money Market Mutual Funds
Similar to saving account investments, money market mutual funds are also easy to liquidate, but offer greater returns. The drawback of the money market is that it is not insured, so this mutual fund investment has a high risk. -
Short Term Notes And Bonds
This short-term investment provides flexible terms from one month to one year. Short term debentures are designed for short term savings and provide very low returns whereas bonds provide more flexibility but are not necessarily safe.
Forms of Short Term Investment
Short-term investments can be made in the form of deposits, bank certificates or securities such as stocks (equity securities) and bonds (debt securities).
-
Debt Securities
Debt securities or known as debentures, bonds or commercial securities depending on the due date for payment or other characteristics. Holders of these debt securities in particular have the right to payment of the principal as well as interest and rights other in accordance with the agreement in the terms of issuance of debt securities such as the right to obtain information certain. Debt securities are often issued with fixed maturities and can only be cashed when the securities mature. These securities can be accompanied by a guarantee from the holder of the securities having a higher rating compared to other unsecured lenders in the event of bankruptcy. -
Equity Securities
Equity securities are company shares (can be ordinary shares but include preference shares). The holders of these equity securities are shareholders. Unlike debt securities which require regular interest payments to securities holders. In this equity securities, the securities holder is not entitled to any payments. In the event of bankruptcy, the value of the shares is only in the form of the remaining assets of the company after deducting debt payments (if any) to all of the company's creditors. Shareholders have the right to the company's profits and an increase in the price of shares where the holders.
Short Term Investment Characteristics
The characteristics of short-term investments are as follows:
- Can be quickly traded or liquidated
- This investment is intended for cash management, meaning that this investment can be sold if cash needs arise.
- Low risk (purchasing securities that are high risk for the government because they are affected by fluctuations in market prices of securities are not included in short-term investments).
Short Term Investment Facility
Short-term investment facilities include:
- Current account service
Current account services are banking products that offer the lowest interest rates, namely the range of 3-4%. Generally used by companies to facilitate payment transactions. - Savings
Savings is a banking service that offers interest on current account services, and can be taken at any time. - Deposit
Deposits have higher interest than savings, but must be kept for a certain period of time. If disbursed before the maturity date, a fine or penalty will usually be imposed. - Money Market Mutual Funds
Money market mutual funds are mutual funds that invest in the money market such as deposits, SBI and short term bonds. Often the rate of return for money market mutual funds is greater than current account services but lower than deposits, but can be disbursed at any time.
Thus has been explained about Definition of Short Term Investment, Objectives, Types, Examples, Forms, Characteristics, Means, hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read our other articles.
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