6 Simple Approaches to Investing for Short-Term Goals

When we think about saving money and our financial goals, we often zero in on the big stuff, like planning for retirement. But life isn’t just about those long-term goals. You probably have a bunch of smaller, short-term goals too, like buying a car, owning a house, paying for your kid’s education, or planning a vacation. These are all significant expenses that need some financial foresight and saving.

The strategies you use for long-term and short-term goals can be quite different. Here’s a simple rundown of six ways you can plan for your short-term financial aims:

1. **Diversify Your Investments**: The old saying “don’t put all your eggs in one basket” is spot on for investing. To grow your savings quickly, think about putting your money into both index stocks and bonds. Stocks might give you high returns while bonds can help cushion against negative outcomes. Short-term bonds are less affected by interest rate hikes and can still provide good returns for goals a little down the road.

2. **Invest in Mutual Funds**: These funds can be a great way to see returns over a shorter timeframe. Unlike individual stocks, they don’t give voting rights but represent a mix of stocks, letting you diversify easily. Mutual funds can earn you money through interest, dividends, or by selling their securities at a profit.

3. **Partner with a Company Like Betterment**: If you’re not confident about investing on your own, companies like Betterment simplify things by managing the choices for you. Depending on what you want, they can handle your portfolio and pick low-cost index options that match your goals.

4. **Open a Money Market Account**: These accounts are like savings accounts but come with higher interest rates. They offer diversified investment opportunities and can result in higher annual earnings. But be wary of high minimum balances and limited access to your money.

5. **Invest in a Certificate of Deposit**: A CD from a bank lets you put money away for a set time and usually offers a fixed interest rate. The potential return increases the longer you leave your money in. Keep in mind, though, withdrawing early can cost you.

6. **Consider Peer-to-Peer Lending**: This involves lending money to others online for interest. Platforms like LendingClub connect you with borrowers based on how trustworthy they seem. As with any investements, more risk might mean more reward.

Investing for short-term gains can be tricky and might involve taking more risks. However, being smart about it usually means having a diverse set of investments. The strategies mentioned above can help you work towards your short-term goals alongside your long-term plans.

What short-term goals are you setting for yourself? Have you tried any of these investment options to reach them?