Whether you are new to saving and investing or have years of experience, it is important to distinguish between your short-term and long-term goals. Allocating short-term money to volatile investments like the stock market can be dangerous and counterproductive, and a sudden market drop could force you to liquidate shares at the bottom.
Being too conservative with your long-term cash could be just as dangerous, however. Playing it safe could mean losing your spending power to inflation, and that can be just as damaging as a major market drop. If you want to succeed both now and tomorrow, you will need to identify and carefully track your short-term and long-term goals, and DiversyFund is here to help you do just that.
Identifying Your Short-Term Goals
There are plenty of reasons why you need short-term cash, and it is important to identify and plan for these near-term goals. Here are some examples of short-term money and how you might need to use it.
• Emergency home repairs
• Planned home upgrades
• Car repairs
• Replacement of old appliances
• Down payment money for a home
• A family vacation
• First college tuition payment for a college-bound child
No matter which of these goals you are saving for, the money you devote to it needs to be kept safe. Safety is a critical component of short-term money, and you should never put this type of cash at risk.
Since safety is of paramount importance, you will want to stash this cash in places with an ironclad guarantee. These monetary resting places may include things like savings accounts, money market funds and FDIC-guaranteed certificates of deposit. If you choose certificates of deposit, just make sure the maturities match your time horizon, i.e. a 12-month CD to pay a college tuition bill that is due a year from now.
Outlining Your Long-Term Goals
Saving money for short-term goals is important, but so is investing for the long term. Stashing your money in a savings account will keep the cash safe, but the low rate of return will probably not provide the growth you need for the long term.
That is why it is so important to divide your investments into long-term and short-term categories. Examples of short-term money are outlined above, and here are some examples of long-term investment goals.
• Retirement for you and your spouse
• Buying a home more than five years from now
• Estate planning and leaving a legacy for your loved ones
In the investment world, long-term money is generally defined as money you will not need for at least five years. It is important to assess your needs carefully and make sure you are really working with long-term money before you make any investment decisions.
If you lack a robust emergency fund, it makes sense to peel off some of your otherwise long-term cash and use it to boost your savings. Once that is done, you can invest for the long-term – in things like stocks, mutual funds, REITs, high-yield bonds and individual securities. Just be sure that you understand the risks of these investments and that you are prepared for the inevitable volatility.
No matter what your goals, it is important to understand how they fit into your overall investment portfolio. Every investor has both short-term goals, things like home repairs and family vacations, and long-term goals, such as college tuition for the youngsters and retirement for themselves and their spouses. By separating these goals and identifying your needs, you can succeed as a saver and investor while keeping your risk to an acceptable level.
For centuries, the 1% has used real estate as a wealth creation tool. They focus on investing in high quality, top tier commercial assets. These investments were never available to the average person. That’s why Craig Cecilio founded DiversyFund; to open up the world of real estate investing to everyone.
Their business model is based around leveling the playing field so anyone can get involved. They are breaking down the barriers that normally keep people from getting started and giving all investors the chance to participate in the highest quality alternative investments.
Headquartered in sunny San Diego, California, Cecilio alongside his team of professionals strive to continue democratizing real estate investing and bring it to more people. Their satisfied customers are expanding their financial strategies outside of traditional asset allocations and catching a glimpse of a brighter future.