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Short Term Investments

Updated on March 6, 2023

Investments on the basis of the duration for which they are made can be categorised as Short Term and Long term investments.
Short Term investments are those which can be converted, redeemed or can achieve their targets in the Short term.
Short Term may have different definitions for different companies and categories of investments, but generally these are investments from a few days to under three years. A period from a few days to one year now is termed as ‘Very short term’.

Features of Short Term Investments

Some features of Short Term investments are:
a) Short Term investments are not necessarily risk free but are generally more stable.
b) These are considered to be liquid and of good quality.
c) Short term investments are suitable for investors looking for low risk products with good return visibility and predictable rate of return.
d) These can be converted into cash with relative ease and without loss of original capital
e) They are used by investors for fixed short-term expenses or for an expected cash flow.
f) Short Term investments can be used by companies for parking their immediate surplus funds for earning interest or for consolidating cash balances.