Short-term strategies

If you’re planning to buy a home within the next year or two, or if your child is finishing high school and you’re facing college tuition expenses, your investment goals are short term.

The investment strategies many investors follow to meet short-term goals emphasize capital preservation. That means keeping the money you have safe, so it’s there when you need it.

Some strategies to consider:

Put your money into the highest paying insured accounts available. If there are penalties for early withdrawal or low balances, you should provide another source of emergency funds so that you don’t lose any income or pay extra fees in your goal-focused accounts.

Put your money into U.S. Treasury bills and time the maturity dates to coincide with the date you’ll need the money. That may mean choosing 4- or 13-week bills, rather than 26-week bills.

Put your money into money market mutual funds or short-term bond funds, recognizing that there is a potential, though limited, risk of losing some of your principal.

Buy high-rated bonds at a discount if they are scheduled to mature within your timeframe.

Gail Dudack,
Managing Director,
Dudack Research Group

Gail Dudack explains how your timeframe for reaching a particular goal may change.

As the timeframe for a particular goal gets shorter, you generally have to change your strategy for achieving it. For example, paying for college or affording a comfortable retirement may start out as long-term goals, but sooner or later they end up as short-term ones.

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