Where should you invest your money if you don’t want to take a lot of risk and you may need access to it in the near future? If you need the money within the next few years, you probably don’t want to take much risk with it. You should probably go for a guaranteed return.
Here is a recent reader question about where to invest money:
Hi, I am 68 yrs. old. I just came into some money and I need to put it somewhere safe; I don’t want to tie it up in a stock portfolio. Is there something that I can do to make a little money and still have access to it without going through paperwork to get it? I had thought about buying a condo with a couple people, and renting it out, but maybe there is something that I have not thought of, that some financial wizard can come up with. I need to make some decisions soon. I don’t mind investing it if can have ready access to it. Hope to get as many ideas and advice as possible. Thank you in advance, Kelley.
Short Term Investing
Hello Kelley, thanks for contacting me. The key with short term investing is realizing that you might need the money in a few years, so you want to avoid too much risk. Here are a few ideas for short term investing.
Avoid stocks and real estate. Since you are already at/near retirement age, you probably don’t want to put much money into stocks because of their volatility. Over short time periods the stock market can be wildly unpredictable and the last thing you want happening is having your portfolio down 30% when you need to withdraw the money.
If you need access to the money, you don’t want to tie it up into real estate, especially with other investors. Real estate investing with partners can be a tricky proposition because someone may wish to sell their equity, while others may want to keep renting out the property. You would also have to consider vacancies, maintenance, condo fees, and other situations that may arise.
Since you may need the money relatively soon, you should look into guaranteed investments.
CDs and savings accounts are guaranteed investments. As long as your bank is backed by the FDIC, then your Certificate of Deposit (CD) or savings account is a guaranteed investment and will not lose money. If you are investing for the short term and have a good idea when you will need the money, then a CD is not a bad way to go.
Choosing a CD ladders or savings accounts for short term investments
If you need full liquidity (access to the money at any given time), then I would recommend a high yield savings account, even though they may earn less interest than a CD. Savings accounts will never lose money and you should have unlimited access to your money.
If you want to earn more interest than most savings accounts and anticipate only needing some of the money at any given time, then I would recommend building a CD ladder. CD ladders will give you access to your money on a regular schedule – either annually or monthly, depending on how you set up the CD ladders.
The example used in the article above is a 5 year CD ladder, but you could just as easily build a 12 month CD ladder, ensuring you have access to your funds once a month instead of once a year. The other benefit of CD ladders is that if you have to break the CD, you only pay a couple months interest, which usually isn’t a big deal, and certainly isn’t as bad as losing a large portion of your principle as can happen in the stock markets, or having your money tied up in real estate.
As always, check with a professional financial planner before making any long term investing decisions.