The upside of short-term investments is that you have access to your money when you need it. Those investing on a short-term basis are often doing so because they need to have the money at a certain time. For instance, if you have a down payment on a house or a loan to pay off, the money should be ready at the go. As a rule of thumb, any investment for less than three years is considered a short-term investment. 

Risky But More Yield

Short-term investments can be profitable at the cost of more risk and can go sideways if not done carefully. Some of you might have heard of the term ‘Momentum Investing’. It’s a strategy used by short-term investors which in theory is based on Newton's Third Law of Motion, that is momentum is conserved. If something is moving, it will continue to move at the same speed unless another force acts on it. 

Quite similar to this law, short-term investors aim to benefit from stocks that have built momentum in the market and are going up and will keep going up. At this point, I know what you might be asking next. How to design a good exit strategy for short-term investments? For this task, I’m going to use price and fundamental momentum combined with the quality of the stocks. 

I typically shortlist stocks that have shown 3-month gains and one-year declines above 10%. All these companies have market capitalization of more than 2 billion USD to ensure they are firmly established. The next move is to secure competitive yields that often move closely in tune with federal funds rate. Here are some additional factors I consider:

• Return on Equity > 15

• Debt to Equity Ratio is less than 5 

• 1-year revenue growth > 10%

• 1-year EPS growth > 10%

Here are some picks that fit that criterion, $SLNO , $AVT , $PBF , $ARW , $VERA 

Note that these are not recommendations. I’m merely offering my take on the subject matter.