When we talk about savings and financial aspirations, it’s easy to focus solely on long-term objectives, like saving and investing for retirement. However, life isn’t just made up of long-term objectives. Share Prices provides all the necessary information about investing and other business goals you might have.
In reality, you may have many other smaller, short-term goals and objectives that require saving. You might want to buy a car, a house, fund your child’s education, or go on a vacation. These are major purchases that warrant careful planning and saving over time.
The investment strategies for your long-term and short-term goals could differ. Here’s a brief guide on six ways to strategize for short-term financial goals:
1. DIVERSIFY YOUR INVESTMENTS
The adage of “don’t put all your eggs in one basket” is true when it comes to investing. If your objective is to grow savings over a shorter period, consider investing in both index stocks and bonds. Stocks can deliver high returns, while bonds can protect against negative returns. Short-term bonds are less sensitive to interest rate increases and can still offer decent returns for short-term goals.
2. INVEST IN MUTUAL FUNDS
Mutual funds can offer good returns over a shorter period of time. They differ from stocks as they do not confer voting rights to the holders but represent a range of stocks. It means you can diversify your portfolio without having to pick and manage individual stocks. Mutual Funds also offer several ways to earn, either through interest, dividends, or from capital gains when its securities are sold.
3. PARTNER WITH A COMPANY LIKE BETTERMENT
For those not very conversant with investing, companies like Betterment can help simplify investing by eliminating some choices. Based on your preferences, they can manage your portfolio and select low-cost index options. You also have the flexibility to decide the goal of your investment, aiding the company to further tailor their strategies.
4. OPEN A MONEY MARKET ACCOUNT
Money market accounts are similar to savings accounts but usually offer higher interest rates. They offer diversified investment opportunities and can generate higher annual yields. However, they may stipulate a high minimum balance for opening the account, and your access to the funds might be limited.
5. INVEST IN A CERTIFICATE OF DEPOSIT
A Certificate of Deposit (CD) issued by a bank lets you invest money for a fixed period. CDs usually offer a fixed interest rate, with the potential for higher returns the longer your money is invested. However, bear in mind that withdrawing money early usually incurs a penalty.
6. CONSIDER PEER-TO-PEER LENDING
You can consider peer-to-peer (P2P) lending, whereby you lend money to others in return for interest. Online platforms like LendingClub or CPA Loveland can help you connect with borrowers based on their creditworthiness. As with other investments, higher risk can potentially yield higher returns.
Investing can be challenging, especially when aiming for short-term returns. It may require taking on more risk. Despite this, smart investing often involves diversifying your portfolio. The strategies listed above can help you expand your investments beyond long-term goals and create a lucrative fund for your short-term objectives.
What short-term goals do you have? Have you tried any investment options to achieve them?
