Best Investments For Intermediate Goals

Most investors are in it from the long-term: retirement, the golden years, the bucket list.

But what about investing for shorter-term goals, such as putting a kid through college? Or starting a business? Maybe getting married?

Most people working to meeting an intermediate goal are somewhat stuck for investing ideas. The retirement market thinks in decades, not five years or so. It can be a challenge.

Here’s a plan to meet your medium-term goals with ease, depending on just how far out you have to think:

1. I need money in five years

First and foremost, save your money in a separate account, maybe even in a separate bank. If you find it easy to transfer money out of this account, you will. Build up an emergency fund in your main account so you will be less tempted to hit your savings account for quick cash.

Now, five years isn’t much. Market history suggests you might get a few years of excess returns but then take a major ride down before the five years is up. So, you’ll need a conservative mix of income-producing instruments, such as dividend-paying stock ETFs and perhaps bond ETFs.

Reinvest the income as it rolls in and keep your portfolio in balance to achieve the maximum return. Naturally, if interest rates go up and you can get a safe return in a CD, that’s the better call for so short a window.

2. I can wait 10 years

Here, you can afford to be a bit more stock heavy. If you want the best of both worlds and interest rates cooperate, invest in a balanced portfolio of stocks and bonds and let the income flow over into a savings account, which you then dump into CDs as rates dictate.

Rebalancing is the best choice when it comes to putting gains back to work, but there’s nothing wrong with locking in gains by letting the income waterfall into a CD with a relatively short term. You could always choose which way to go year-by-year.

3. This is more of a two-decade plan

Now you’re getting close to enough time to invest the way a retirement saver might. A well-designed, inexpensive portfolio of ETFs can give you the performance you desire and the flexibility to capture the best of each investment class over the years.

If you are saving for college, consider the tax breaks that might be available to you in a 529 plan. However, try to pick a plan that gives you the freedom to manage your own portfolio using ETFs, rather than pricey target-date funds run by the plan.

The best investments for intermediate goals are going to be the same types of investments that retirement investors use, just with a more judicious approach toward liquidity and with a plan to exit without increased risk. All it takes is a well-crafted portfolio and a few weekends a year to rebalance.