5 Best Short-Term Investments to Make Now

Here are short-term investing strategies you need to take advantage now.

You know we usually talk long-term investing in the Let’s Talk Money channel, that buy-and-hold strategy for your financial future…but sometimes you just need fast cash so you need to get a hold of the best short-term investing strategies out there. Sometimes you can’t wait for the next dividend check or for that value stock to head higher.

For those times, I’ve got five short-term investments you can make that will not only put cash in your pocket but can be great ways to balance your long-term strategies. In this video, I’ll reveal each of those short-term investing strategies, how to find them and the risks involved. I’ll also show you the key differences between short-term and long-term investing and how to profit from both!

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5 Best Short-Term Investing Strategies You Need to Do Now

I want to get started on our list of short-term investments so I’ll show you those differences with other types of investing and the risks to watch for later on in the video above.

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Our first short-term investing strategy is using technical analysis for swing trading in stocks.

And I’m excited to cover this one because it’s a strategy we haven’t talked about much on the channel but can be a great addition to your investing toolbox whether it’s for short-term or long-term investing.

Technical analysis is just using a stock’s price history to forecast near-term moves in the share price and there are a lot of signals you can use but I’ll show you an example next. Swing trading then is using these short-term signals to take a position in a stock over days or weeks to profit from that forecasted change.

So swing trading is much less intensive than day-trading because you’re giving the shares longer to meet that forecast. You’re not worried about smaller moves but waiting for the bigger change predicted in your chart.

And one of the easiest of these short-term trading signals is the 50-day Simple Moving Average. This is just the stock price average over the last 50 days and most investing apps will show you this line on a chart.

And we often see stocks bounce off of that 50-day moving average, especially in an up-trending market, maybe the shares will weaken a little but then bounce higher off that level of support. A great example of this is the SPDR S&P 500 ETF, ticker SPY, which is just a fund following that broad market index. And you can see here a chart of the last five months, the share price has bounced off that 50-day moving average line six times. Each time it fell to that support, you could have bought the shares for a quick rebound, making three- to five-percent over the next couple of weeks.

Not only is that technical analysis of stock charts a great short-term strategy but for you long-term investors out there, it can be a good signal of when to buy into your long-term stocks.

We haven’t covered technical analysis much here on the channel so I’m teaming up with Thomas Carvo to do a free webinar, Three Trading Signals to Use in Your Investing. The webinar is totally free and as a bonus, besides those three technical analysis signals, we’ll also show you how to use them to make money even if stocks fall so look for that free signup to the webinar below!

One of the most popular short-term investing strategies here on the channel has been small-cap and penny stocks.

Now there’s no formal definition of what makes a penny stock but it’s usually around the size of the company, the market cap of the stock. So any stock with a market cap under $1.5 billion is considered small cap and a penny stock would be something smaller than that, generally less than $500 million.

So it’s not just stocks that trade for pennies or even those under a certain share price. That’s a common misconception about penny stocks.

But these stocks can be extremely volatile with double-digit price swings in any given day. And while I like to take a longer-term investment in my penny stocks, they can make for great short-term trades as well.

That’s because these small companies aren’t widely followed by analysts or investors. That means, with a little research on your part, you can find some great stocks selling at a discount.

For example, I recommended shares of Surgalign, ticker SRGA, in our stocks under $1 video on August 16th. The company has a history of innovation and a new AI-based surgery platform that makes it a disruptor in the industry.

Shares are up 62% in less than three weeks since the video with the average analyst price target still another 183% from the current price.

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Again, I like to use a longer-term approach to penny stocks but that’s just from my background as a venture capital analyst. My job was to look for startup companies with that 10X potential for a three- to five-year investment.

Short-term investing in penny stocks means looking for the near-term signals and technical analysis as well as those long-term fundamentals. Some other technical signals you can use in picking stocks for a short-term bounce include the RSI indicator, which is a momentum indicator that measures if a stock is overbought or oversold over a period of time, usually 14 days. A stock with an RSI under 30 suggests it may be oversold and ready for a positive reversal.

On-Balance Volume is also a popular momentum indicator for short-term stock trading, using the volume of shares traded to forecast price movement. This is actually another of the signals we’ll talk about in the webinar but basically you’re looking for stocks with higher volume, essentially money inflows from institutional investors, where the stock price hasn’t reflected that interest yet.

Understand though, there are a lot of scams out there in penny stocks so knowing what to avoid is just as important as knowing how to find these. Avoid any stock you hear about in an email or out of the blue from someone you don’t know. These are usually pump-and-dump schemes where investors try to promote a stock they own so they can sell out at a profit. Always do your own research on these and have a fair value price at which you’re going to sell the stock to take profits.

Some Misconceptions About Stock Trading

We’ve still got three more short-term investments to reveal but it’s important you know the differences here between these short-term strategies and long-term investing. Where the long-term investing we usually talk about is built around analyzing the value of a company, finding an intrinsic value of a stock and the ones that will produce returns over time, short-term investing is based more on investor sentiment or a certain catalyst for the shares.

Don’t get me wrong, short-term investing involves just as much research and work as that long-term analysis, and this is one of the biggest misconceptions about stock trading. People think you can just flip over to CNBC, get a few stock tips and spend the rest of your life on some sandy beach.

There are millions of investors out there, all looking for that short-term profit. You’ve got to be better at finding the near-term catalyst that will move stock prices.

Short-term investing is also much more of an either-or strategy, either you’re right about the direction of a stock over the next couple of weeks or you’re wrong. Those higher returns are nice when you’re right but being wrong can totally wipe out your investment. By comparison, long-term investing can produce returns even if you’re not picking the very best stocks but just by riding that natural upward direction in the market.

Following these short-term strategies isn’t for everyone and there’s nothing wrong with taking the slow-and-steady approach of long-term investing. It’s the one I prefer but if you’ve got the risk tolerance, these quick investing ideas can make you a ridiculous amount of money!

We’ve talked about options investing as a way to limit risk on the channel but it can also be a great trading strategy for short-term profits.

Options are a special type of investment that gives you the right to buy or sell a stock from now to a point in the future and for a set price. You pay a premium that’s a fraction of the price of the shares and then can use this option to buy or sell the stock no matter what the price does.

And the reason options work so well with short-term trading is because of that leverage. You can buy call options on a stock, the right to buy that stock at a certain price, for a fraction of the stock price.

For example, here are the September 17 options for shares of Ford Motor. These options expire in two weeks and give me the right to buy, which are the call options on the left, or the right to sell, the put options on the right, for a set price. Here look at the call options on the left and that Strike Price of $13.50 down the middle, that’s the set price I can buy shares if I buy those options.

Here it says I can lock-in that price of $13.50 for shares of Ford through the next two weeks for a premium of just $0.24 per share. So if I was expecting news to come out or something that could send Ford back up to its peak of $16 a share over the next two weeks, I would buy these call options. If then the stock did go to that $16 over the period, those options would be worth at least $2.50 each which is the stock price minus that guaranteed price on the option…that $2.50 would be a 10X return in two weeks.

Now with that potential to 10X your money, there’s also the possibility of losing it all and that’s the risk in options investing. Rather than a long-term investment in a stock, you have a short-term bet on the direction of the stock price.

Since it’s time-sensitive, using options for short-term investing is great when you have a specific date you’re watching or if you expect major news to come out for a stock within a limited time period. Whether it’s approval of a new drug, clearing for a merger or the earnings release, anything that will move the shares in that defined period.

Let’s look at one more example of short-term investing with options and we’ll use options on Tesla here. Now shares of the EV maker have fallen in the week around earnings by an average of 3.5% in the last four quarters, and that’s despite beating earnings expectations by 18% over each of those reports.

The company is expected to report earnings of $1.38 per share for the third quarter, due out around October 19th. That would be a solid increase of 81% over the previous year but would be well off the 229% growth booked in the second quarter.

So if I thought Tesla was going to disappoint on earnings again, maybe because of the chip shortage, then I could use what’s called a put spread for the November 19th options. These options expire about a month after the earnings report, and you see here, I can buy the put options that give me the right to sell the shares for $750 if I pay $70.70 each for those options. At the same time, I can sell the $730 put options to offset that cost by $60.15 per share so in effect, my max upside is $20 if shares close below $730 after the earnings report and I’m only risking a little over $10 per share…I’m risking $10 to make $20 per share.

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Now there are a lot of details into options investing and want to get on to the next short-term strategy. I did a full video on options investing including my five favorite strategies a few months ago.

Leveraged ETFs are another great way to make short-term investment calls produce higher returns.

Most of you are familiar with regular ETFs, those funds hold shares of hundreds or thousands of stocks and then sell shares of the entire group to investors. It’s a great low-cost way to get exposure to all the stocks in a theme with just one investment.

Leveraged ETFs though are a little different. These are set up to get two- or three-times the return on a sector or theme. Instead of holding those shares of stocks in the group, the fund manager creates this higher return target through a combination of options and swaps. Basically, the manager takes leveraged bets on the stocks or the index to get that 3X return.

Let’s take a look at some of the most actively traded leveraged ETFs and you’ll get a sense for how these are used. For example, the top fund on the list, the ProShares UltraPro Short QQQ is designed to produce positive returns when tech stocks fall. The manager shorts options and swaps on stocks in the Nasdaq index to get that 3X leverage. So instead of investing WITH the sector, the fund is investing against it and benefiting from a fall in prices.

Another example here, the Direxion Junior Gold Miners Bull, is designed to produce three-times the return on a group of junior gold miners. Here, it’s investing along with the group, benefiting when share prices increase but using the leverage for higher returns.

These funds are often used to take a short-term position in or against a group. Maybe you believe tech stocks are overbought right now, so you might invest in one of the bear funds for that 3X leverage if tech stocks fall.

A lot of investors will use these as hedges on their portfolio as well, so protecting them from near-term weakness. For example, if you do have a lot of money in tech stocks but are a little worried about the next month, you can invest some money in the tech bear funds and then the profit on that investment will help to cover short-term losses on your stocks if they do fall.

What You Need to Understand About Leveraged ETFs

What you need to understand about these leveraged ETFs though is they have some major drawbacks that means you should only use them for short-term investing. Because the fund manager has to constantly be buying and selling those options to maintain the leverage position, these funds are very expensive to run and so the expense ratio you pay to hold the fund is much higher than regular ETFs. Also, because of that constant rebalancing the fund manager has to do, the funds won’t get that two- or 3X leveraged return over the long-term. They might be able to produce that objective return over a few weeks or even a month but the relationship breaks down over time on those costs.

Like most of these short-term investments, holding these funds can be risky as well. You’ll make that two- or three-times return if you’re right on the direction of the stocks in the fund. If you buy that Direxion Junior Gold Miners Fund and gold prices spike taking gold miners up 5% then you’ll see something around a 15% return on the leverage.

But that leverage works the other way as well. If the stocks in that fund were to lose 5% then the leveraged fund would fall on the order of 15%, so you definitely want to do your research on each of these.

While I’m holding my cryptocurrencies long-term, there are some short-term ways you can invest in crypto as well.

There has been evidence found for seasonality and other momentum trends in bitcoin prices. For example, in research by CoinMetrics over the last ten years, returns in April, May, October and November have been better than the rest of the year. They also found a strong momentum effect with positive months of returns often leading to at least one more month of positive returns.

What’s caught my eye lately in that shorter-investment idea on bitcoin is the difference in unique addresses and the price of the token. We’ve seen in the past that the number of unique addresses on the blockchain is directly correlated with the price of bitcoin. It’s a theory called Metcalfe’s Law and we’ve used it in the past to make longer-term price predictions.

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Lately though, the relationship seems to have broken down a little with unique addresses on the blockchain down about 31% from the peak in April of this year. Over that time though, the price of bitcoin is only down 23% from the high set that month.

I think, from this, you could make the argument for price support on bitcoin even in the face of lower activity on the blockchain. Maybe the idea that institutional investing and cash held in bitcoin is supporting the price so when we see that blockchain activity increase back to its high, you could see the price of bitcoin jump again well past $64,000 each.

I’ve also studied daily prices on bitcoin on data over the last 18 months and found the best times to buy are over the weekend, and often late at night Saturday or Sunday. On average, the price of bitcoin was 1.4% less on Sunday compared to the weekly average and nearly 2.5% cheaper than the price on Friday.

It is important to diversify your investments in order not only protect yourself from risk but also gain the best return. However, many short-term investment ideas come with a higher degree of uncertainty than long-term investing so it’s vital you do research and limit risky behaviors before trying them out for real!