Investing is a long-term process. For example, you contribute to a 401(k) and an IRA for a retirement that may be decades away. But is there a place in your investment portfolio for short-term vehicles as well?
In a word, yes. Short-term investments can help you in at least three ways.
First, short-term vehicles, such as money market accounts and three-month certificates of deposit, are highly liquid, so, if you need cash in the near term, you’ll have it available.
Second, most short-term vehicles aren’t strongly affected by financial market movements, so they can help reduce the effects of volatility on your portfolio, especially if it is concentrated on stocks and stock-based exchange-traded funds and mutual funds.
And third, you can liquidate some of your short-term investments to pay for unexpected costs, such as a major home or car repair. Without these short-term vehicles available, you might be forced to dip into your retirement accounts.
You need to maintain a long-term focus to achieve your important financial goals – but along the way, short-term investments can help.
This content was provided by Edward Jones for use by Daniel Pellerin, your Edward Jones financial advisor at 189 East Main Street Suite G, in Newport, (802) 334-6261.