Combining long and short term financial goals gives you more security

Long term investment goals typically involve an investment time-line longer than 10 years. The most common long term goals set in the US, are typically to fund
- Full time college education for the children
- A comfortable, enjoyable and secure retirement
There are some marked differences between short and long term investing. In particular, long term investors
- need to steadily invest a minimum set amount regularly, typically every month.
- need to not draw out their investments to fund (particularly) unplanned short term expenditure
- need to be prepared to see their investment fall (and rise) in value, even for several years.
Patience, persistence, and not panicking at the first sign of market jitters are the hallmark of successful long term investing. The fluctuations in the value of investments, is known as volatility. Increased volatility tends to be accompanied by higher rates of return, in the long run. Since a long term investor has no intention of immediately drawing out their funds, this volatility is not as important, since it is just an accounting profit or loss, will little bearing on the final long term performance of their investment.
Long term investors know that while the stock market, (and by extension mutual funds), will rise and fall in the short term, historically, the market has shown that no other investment type can compare with its steady growth.
Most people though, will have both short and long term goals. The need to save for retirement can also be accompanied by the need to buy a new car in a couple of years time. The simplest investment strategy, is to split the money one has to invest, between two or more mutual funds, serving distinct goals.
Short term goals can be funded by monthly investments in low volatility money market funds, while the rest of the invest able amount can be put in more volatile and risky stock market funds, that do give greater potential for high rates of return.
The appropriate ratio for splitting short and long term investment funds, will depend very much on the individual investor. Factors such as the age to retirement (or kids attending college), as well as the relative importance of the short term investment goals will all play a part in determining this ratio. Many new investors will begin their investments with a 50/50 split between the two, and gradually adjust this ratio to reflect their changing circumstances, and their increasing understanding of the different mutual funds on the market.
Another important reason for splitting any invested money between different funds, with differing financial characteristics, is better known as diversification. Simply put, diversifying your investments, is the equivalent of not putting all your eggs in one basket. There are a lot of different diversification strategies and options available to investors, including those that attempt to benefit irrespective of what happens to the market. While the individual investments would be volatile, the overall effect is a portfolio that has steady income. A very simple example of this, would be investing in both a coffee and and ice-cream stand. When the ice-cream is not selling in the winter months, the coffee is, and vice versa for the summer months.

Long term investment goals typically involve an investment time-line longer than 10 years. The most common long term goals set in the US, are typically to fund - Full time college education for the children- A comfortable, enjoyable and secure retirement
There are some marked differences between short and long term investing. In particular, long term investors- need to steadily invest a minimum set amount regularly, typically every month.- need to not draw out their investments to fund (particularly) unplanned short term expenditure- need to be prepared to see their investment fall (and rise) in value, even for several years.
Patience, persistence, and not panicking at the first sign of market jitters are the hallmark of successful long term investing. The fluctuations in the value of investments, is known as volatility. Increased volatility tends to be accompanied by higher rates of return, in the long run. Since a long term investor has no intention of immediately drawing out their funds, this volatility is not as important, since it is just an accounting profit or loss, will little bearing on the final long term performance of their investment.
Long term investors know that while the stock market, (and by extension mutual funds), will rise and fall in the short term, historically, the market has shown that no other investment type can compare with its steady growth.
Most people though, will have both short and long term goals. The need to save for retirement can also be accompanied by the need to buy a new car in a couple of years time. The simplest investment strategy, is to split the money one has to invest, between two or more mutual funds, serving distinct goals.
Short term goals can be funded by monthly investments in low volatility money market funds, while the rest of the invest able amount can be put in more volatile and risky stock market funds, that do give greater potential for high rates of return.
The appropriate ratio for splitting short and long term investment funds, will depend very much on the individual investor. Factors such as the age to retirement (or kids attending college), as well as the relative importance of the short term investment goals will all play a part in determining this ratio. Many new investors will begin their investments with a 50/50 split between the two, and gradually adjust this ratio to reflect their changing circumstances, and their increasing understanding of the different mutual funds on the market.
Another important reason for splitting any invested money between different funds, with differing financial characteristics, is better known as diversification. Simply put, diversifying your investments, is the equivalent of not putting all your eggs in one basket. There are a lot of different diversification strategies and options available to investors, including those that attempt to benefit irrespective of what happens to the market. While the individual investments would be volatile, the overall effect is a portfolio that has steady income. A very simple example of this, would be investing in both a coffee and and ice-cream stand. When the ice-cream is not selling in the winter months, the coffee is, and vice versa for the summer months.

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