When you invest money for a short-term goal, taking extra risk is like playing with fire. Since you don’t know what might happen in the markets in the next few years, it’s best to keep things in perspective. The best short-term investments don’t lose you money when you need it most.
First, let’s define short-term as any time in the next five years. This should give you a good idea of a time horizon that fits with a short-term savings goal like a vacation, home down payment, a wedding, or college savings.
Ultimately, you need to base your decision on your time horizon, the amount of money, and how much risk you’re willing to take. Though, I’d caution on overreaching for returns. The idea of taking more risk just to squeak out an extra tenth of a percent makes no sense. The last thing you want is to send little Joey off to college only to find out that your savings fell short because you lost money in the past year. Continue Reading…