As the name implies, short-term investments are usually sold after holding them for three years or less. Examples of investment vehicles that lend themselves to a shorter investment period include stocks, mutual funds, and some bonds and bond mutual funds.
You may also hear of short-term investors being referred to as day traders. Before getting into this type of investing, work to understand the basics of the stock market, be careful of single-stock purchases, and be mindful that it's very, very difficult to gain higher returns than the average rate of return of the stock market (about 7 percent) by trading short-term.
Additionally, be careful to not place all of your investment into just one company. If that company were to go under, you would lose everything. Diversify your risk by spreading your stock investments over a variety of industries and types of companies.
It is often easier to choose a few good mutual funds that already spread the risk for you by purchasing several different types of stock. And finally, only invest money that you can afford to lose, not money that needs to pay the mortgage next month.