Best short-term investments

Editor’s Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. CNBC Select will update as changes are made public.

There are many good reasons why you would want to invest your money in the short term. Perhaps you intend to use that cash to buy a new car, fund a first-time mortgage, plan a wedding or simply want to build an emergency fund.

For all these goals, cash needs to be put someplace where it’s safe and accessible on a whim. Enter short-term investment vehicles: the perfect place to stash the cash you’ll need within the next five years.

Though short-term investments typically come with lower rates of return than long-term investments, they can diversify your income and offer flexibility when you need it. Short-term investments stand out for being highly liquid, stable and relatively low risk, so you can count on your money being there when you need to withdraw it quickly at low (or no) cost.

For all your short-term money needs, these are the five best investment vehicles:

High-yield savings accounts are as safe and as easy to access as your traditional brick-and-mortar savings account at a big bank, but offer a much higher return (both accounts’ APYs are variable rates).

You can rest assured that your money is protected through FDIC insurance up to $250,000 per depositor per bank, and you can make deposits into your account at any time. Keep in mind that although the Federal Reserve removed Regulation D — which limited “convenient” withdrawals and transfers to no more than six per month — banks generally still enforce this restriction.

The high-yield savings accounts below offer above-average APYs and don’t enforce a limit to the number of withdrawals or transfers you can make. Both the Lending Club High-Yield Savings and UFB Premier Savings also provide you with a free ATM card, making it easy to access your savings account on the go.

A certificate of deposit, or CD, is another type of deposit account that is federally insured for $250,000 per depositor per bank — meaning your cash is safe up to that limit.

CDs differ from high-yield savings, however, in that they’re not as accessible. Traditional CDs lock up your money for a specified amount of time, but the key is that you pick how long so you know what to expect. CD term lengths vary, typically ranging between three months and five years, and usually the longer the term, the higher the fixed interest rate offered.

CDs can be good vehicles for short-term investments because in a high-interest-rate environment, they allow you to lock in a good rate for, say, three years, at which point you may plan to be ready to buy a house. With a CD, you make a one-time deposit when you open the account and don’t keep contributing to it like you do with a savings until the CD term length is up.

If you feel that you need greater access to your cash or don’t necessarily want to commit to locking it up, you can go with a no-penalty CD, which allows for easy withdrawals cost-free (just make sure the rate offered is worth it). Other types of CDs exist, too, such as add-on CDs that allow for making additional contributions.

Banks like Ally Bank and Synchrony Bank offer no-penalty CDs.

The third deposit account on this list, money market accounts, or MMAs, are also stable vehicles for your short-term investments because they offer FDIC insurance up to the standard $250,000 per depositor per bank.

With MMAs, you can deposit cash at any time and the same six-per-statement-cycle withdrawal or transfer limit may apply, depending on your bank. MMAs offer variable interest rates and checking account features, such as check-writing privileges, debit cards, ATM access and out-of-network ATM fee reimbursements. Cash withdrawals from an ATM isn’t typically part of any imposed limit, so this allows you to always access your cash directly and immediately.

Ally Bank and Sallie Mae both offer top-notch money market accounts.

Issued and backed by the U.S. government, government bonds are very safe and low-risk, making them ideal as short-term investments. Plus, they offer reliable income. The market for U.S. government bonds is also highly liquid, so you can sell and access your money easily. The best way to buy government bonds is directly through the government’s TreasuryDirect.gov.

In addition to purchasing bonds directly, you can also invest in a government bond fund. Bond funds give you access to various types of bonds so you can invest in a mix.

Treasury bills, or T-bills, are a type of fixed-income security issued by the government with a short maturity term of within a year. T-bills are nearly risk-free and highly liquid, which means they are very safe places to park the cash you’ll need soon.

Keep in mind, however, that T-bill returns typically react inversely with the Federal Reserve benchmark rate; a higher rate set by the Fed means lower returns on T-bills. In contrast, high-yield savings and CDs usually raise their rates as the benchmark rate goes up.

You can purchase T-bills directly from the government via TreasuryDirect.gov or through brokerages like Fidelity and Charles Schwab.

Short-term investment vehicles are a smart choice for those who are looking to prioritize stability and accessibility when it comes to their money, rather than the highest return. In addition to being highly liquid, most accounts on this list are FDIC-insured so your investments are protected. And you have options, from a high-yield savings account, CD and money market account, to government bonds and Treasury bills.

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