Why are you investing this money? That is one of the most important questions to answer prior to making any investment. You see lots of reports and hear advise as to where to invest your money, but before you make any decisions, you need to determine “the why” behind the investment.
Are you investing for the short term like to buy a car or take a vacation next year? Are you investing for the long term such as retirement in 20-25 years? Your time frame will help to determine one of your why’s of investing. You will treat short-term cash differently from long-term retirement needs.
If you understand how much money is needed for various long or short-term goals you can avoid one of the biggest mistakes people make. Knowing the purpose of your money will help you to redirect your money and not lump it all into one single account or fund.
Once you define the why (the purpose for this money) and include the time frame, and the amount needed for your investment, you are ready to move to the next step.
The next step is to look at different long or short-term investment strategies. You will use different tools and strategies for that vacation next year then you will for retirement in 20 years.
Saving for the Short Term
For your short-term goals, it is best to focus on saving rather than investing. This plan will protect your money and lower your risk from market volatility. You are not going to make great gains from interest rates, but you will protect your principal in a stable manner.
Some of the options for short-term investments are:
· Savings accounts
· Money market accounts
· Short-term bond funds
· Fixed income funds
Investing for the Long Term
One of best places for money for the long term is in the stock market. Even with its ups and down’s, history has shown that investments will likely rebound after a down turn in the market.
There are other long-term options as well such as annuities and life insurance.
Once you define “the why” behind your investments, we will develop a specific and strategic plan to help you reach your goals.