An Insight into Importance of Selecting Investment Strategies
According to Time Horizon for Achieving Investment Goals
What type of investment products to select? Answer to this question primarily depends upon goals you have as well as the time horizon (such as long, medium and short term) within which you want to achieve those goals. Our aim here will be to examine kind of investment strategy an investor needs to have for achieving short term investment goals.
Strategies to Achieve Short Term Investment Goals
What are considered short term goals?
Goals which are to be achieved within a time period of three years fall in the category of short term goals. Best thing to do for achieving such goals will be to discuss your position with financial advisers so that most suitable investment products can be selected which will help you accomplish your goals.
What would be right investment strategy when an investor has such short term goals?
Generally, when you have short term goals the main priority will be safety and liquidity of funds rather than growth of investments. As such, it will be better to take less amount of risk as you get closer to achieving the goals. Accordingly, you need to look into options such as credit union accounts or cash equivalent investments as there is very less likelihood of loss in value of such accounts in a short period of time (like six months to one year).
What are some of the investment options that investors need to consider?
Before selecting any investment first thing you will have to do is consult experienced financial advisers to understand various options that are available for you to select from and how feasible those options would be for you. Some of the useful investment options suitable for investors with short term goals include:
- Liquid investments
- Investments which do not have fees or penalties
- Cash Investments
Liquid investments are those investments which are easy to sell and result in no or very insignificant loss of value. Few such investments with low risk include treasury bills and money market funds.
Investments Which Do Not Have Fees or Penalties
You need to take advice of financial advisers about investments wherein penalties or fees are not levied for withdrawal before maturity date. As for instance, CDs (of five year term) are considered safe investments but they would not be the ideal choice for achieving your short term goals due to the early withdrawal penalty they have.
Many investors avoid cash investments due to the fact that they have lower interest rates which are not adequate in the long term and cannot outpace inflation. But for goals to be accomplished in a short period of time, they are considered suitable option to choose. In addition to it, few of the cash investments have government insurance providing them added security, making them a good option to select.
As we can see proper planning is necessary when you have short term goals to accomplish. It is also important to discuss your financial position with financial advisers to get suggestions which are appropriate for your situation.