Investing your money has shown to be one of the best ways to grow your money over time. However, investing always carries inherent risks, especially if you need access to your money in the short-term.
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CNBC spoke with Priya Malani, the founder and CEO of Stash Wealth, who explained that you should avoid investing your money if you need it in just one year.
“Almost everything outside of savings accounts, money market accounts, Treasury bills, and certificates of deposit has risk,” Malani said. “Stocks, mutual funds, bonds, and real estate all contain various levels of risk. Risk doesn’t mean it’s bad but you don’t want to take on risk unless you have time to ride out the ups and downs.”
Avoiding risk if you need cash in the short-term is a wise idea. Luckily, there are a number of short-term, low-risk investments you can consider to make extra cash over the course of a year.
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Earning passive income doesn’t need to be difficult. You can start this week.
4 Smart Investments That To Make A Bunch of Extra Money in One Year
Here are four investments that will earn you a ton of cash in just one year, according to U.S. News & World Report:
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High-yield savings accounts: Opening a high-yield savings account is a great way to maintain liquidity and earn a virtually risk-free yield on your cash over the course of a year. High-yield savings accounts typically provide a higher APY than savings accounts at traditional brick-and-mortar banks. You’ll earn interest on your money each month, which can serve as a steady stream of passive income. At the same time, your money will continue to grow over time thanks to the magic of compounding.
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Certificates of deposit (CDs): If you’re looking to earn a higher interest rate on your money than a high-yield savings account offers — and you’re willing to have it locked up for a determined period — consider a certificate of deposit (CD). You earn interest on your money just like a high-yield savings account, however, you won’t have access to your funds until the CD matures. Early withdrawals can result in stiff penalties. Many banks offer CDs with terms ranging from a few months to several years.
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Money market funds: Money market funds are unique mutual funds that primarily invest in high-quality, short-term debt instruments. These funds consist of low-risk, low-return investments, such as government securities and treasury bills, that offer investors a safe and secure way to invest in cash-equivalent assets while still having relatively easy access to their money. Money market funds may yield a lower interest rate than a typical high-yield savings account, but one key differentiator is that they often provide direct access to your cash in the form of ATM withdrawals and checking.
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Treasury bills: Treasury bills (or T-bills) are short-term debt instruments issued by the U.S. government to fund its operations. They’re sold by the U.S. Department of the Treasury in denominations of $100 with maturities ranging from a few weeks to up to 52 weeks. They’re considered one of the safest short-term investments because they’re backed by the full faith of the U.S. government. T-bills can be purchased electronically directly from TreasuryDirect.gov.
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This article originally appeared on GOBankingRates.com: 4 Investments That Will Earn You A Ton of Cash in Just One Year