How to Make Cash Investments

Generally producing lower but more secure returns, cash investments are a foundational link in the investment chain. Cash investments are excellent for investors looking to make guaranteed but modest returns with little risk to their initial capital.

Understand Cash Investing

Look no further than your standard savings account to grasp the fundamentals of cash investing. Checking and savings accounts are one of the most basic types of cash investment, offering a guarantee on your principal in exchange for a modest interest rate.

Ask your financial advisor or bank about investing opportunities in money market mutual funds. These funds specialize in earning investors money in short-term debt instruments, and they are generally regarded as one of the safer ways you can invest your cash.

Invest in Certificates of Deposit (CDs). These certificates are issued by banks and other financial institutions to cover their short-term financial commitments and are available for terms of up to 5 years. Remember, though, that any CD that takes more than 6 months to mature should be considered a long-term investment, not a cash investment.

Buy Treasury Bills, or "T-bills." Maturing in 52 weeks or less, a T-bill is purchased at a discount rate. For example, you might pay $1,900 for a $2,000 T-bill, getting $2,000 back and making a $100 profit when the T-bill matures.

Buy government savings bonds. One of the most popular forms of cash investing, savings bonds have varying values and maturing periods associated with them, taking anywhere from a few months to a few years to mature and become profitable. There are four different types: E, EE, H and I bonds.

Make cash investments in annuities and life insurance policies. An annuity releases tax-deferred income once per year during its guaranteed payout phase and is usually offered by life insurance companies. You can also invest in life insurance, getting a policy loan to access the equity you've built up in your insurance policy.

Make Cash Investments

Seek the advice of a financial advisor, either an independent one or an employee of the bank where you do business. Discuss your investments goals and needs, and evaluate what type of cash investing would be best for you.

Make diversified investments, covering both the short term and the long term.

Seek ways to keep your profits invested. This can help you avoid paying taxes on your capital gains right away.

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