Rules for Financial Freedom
Here is the third installment of Rules You Can Follow That Will Help You Attain Financial Freedom.
Investment vehicles should be chosen based on your goals. You should not use long-term investments for short-term goals and vice versa. The shorter your time frame, the more stability you need. It is very tempting to use a long-term vehicle for a short-term goal in an effort to “jump-start” the investment. Don’t do it! It is a recipe for failure.
I suggest breaking down your financial goals by time frame. Anything for which you will need the money within five years would be considered short-term and anything five years or longer would be long-term. For instance, an emergency fund is a short-term goal. Retirement is a long-term goal. Education savings is typically a long-term goal.
Appropriate investment vehicles for short-term investing could include savings accounts, money market accounts, certificates of deposit (CDs) and short-term bond funds. Long-term investments could include stocks, bonds, mutual funds, ETFs, and annuities.
Matching up the time frame with the appropriate investment will go a long way in helping you accomplish your goals.