What Is a Short-Term Investment Fund (STIF)?

A short-term investment fund (STIF) invests in short-term money market investments of high quality and low risk. This type of fund is considered to be one of the most conservative investments in the investment market. Investors invest in short-term investment funds to protect capital. Short-term investment funds are generally expected to keep pace with inflation and earn marginally higher returns than a standard personal savings account.

Key Takeaways

  • Short-term investment funds are usually high quality with low risk.
  • STIFs are the most conservative types of investments on the market.
  • These funds are known for liquidity.

Short-term investment funds are also generally considered to be liquid investments. In fact, many short-term investments funds provide investors with checks that they can write against the funds in their short-term investment funds, for ease of access to these funds. Most funds also give investors online access to make deposits and withdrawals, or view monthly, annual, and quarterly statements. Because of their high degree of liquidity, investors can make deposits and withdrawals to these funds whenever they want; many such funds advertise 100% daily liquidity.

Understanding the Short-Term Investment Fund (STIF)

Short-term investment funds offer investors the opportunity to protect capital while earning a marginal rate of return. Many short-term investment funds benchmark their fund returns to a Treasury bill index. Short-term investment funds typically include cash, bank notes, government bills and conservative bond holdings characterized as safe short-term debt instruments.

Short-term investment funds are also known for liquidity. These types of funds are often used by investors who seek a short-term holding before moving their investments to another investment that will provide higher returns. These funds traditionally have low management fees, usually well below 1% per year. They also typically have low transaction costs.

Short-Term Investment Fund Managers

Money market funds are the most broadly known short-term investment funds. Short-term investment funds can also invest in short-term bonds in various categories. Below are examples of investment providers that offer a wide array of money market funds for investors.

  • Schwab: Schwab Purchased Money Funds are grouped into three categories: prime, government and treasury, and municipal. Investor share classes require a minimum investment of $1, with seven-day yields of between 0.77%-1.6%. Schwab’s Variable Share Price Money Funds require a minimum investment of $1 million and offers seven-day yields of 1.6%.
  • Vanguard: Vanguard offers three taxable money market funds and numerous non-taxable municipal funds. Prices of the funds are $1. Expenses range from 0.09% to 0.16%. Average annual returns range from 1.45%-4.89%.
  • JPMorgan: JPMorgan offers approximately 60 money market funds. JPMorgan money market funds have a net asset value of $1. The JPMorgan Prime Money Market Fund (CJPXX) has the best one year return as of December 31, 2019. The Fund’s one year return is 2.17%. The Fund has an expense cap of 0.18%.
  • American Century: American Century offers five funds in its money market category. American Century money market funds offer free check writing for liquidity and easy accessibility. The Prime Money Market Fund (BPRXX) is one of the category’s top performers. Its total year to date return as of December 31, 2019, was 1.68%. The Fund has over $1.4 billion in total assets with an expense ratio of 0.57%.