Skip to main content
Go
Remember Me?
Magazine
Browse Articles
Current Edition
Archives
Search
Facebook
Twitter
LinkedIn
Login
Find CPE & Events
Donate
Join
Help
Redirecting to cart, please wait...
has been added to the cart.
You have
items(s) in your cart.
Menu
My Account
Overview
My Profile
My Activities
My CPE Tracker
My Certificate of Completion
My Communication Preferences
My Transactions / Discounts
My Membership / Open Invoices
My Committees
Members
Overview
My Account
Who We Are
Highlights
Renew
Benefits
Chapters
CPA Career Center
Leadership
Exclusive Savings
Committees & Sections
Technical Resources
Listserves
Firms
Education Foundation
Overview
Conferences
Webcasts
Self Study
Prepaid Education
Ethics Exam
Catalog
FreePE Webcast Series
Series
Core Staff Training
Firm Training
Policies
Government Relations
Overview
Grassroots Advocacy
Tracked Legislation
CPA-PAC Q&A
Grassroots Program
Contact Your Legislators
Advocating for CPAs
News
Overview
Hot Topics
California CPA Magazine
Newsroom
Peer Review
Overview
Peer Review: Firm Resources
Peer Review Reports
Peer Review: Reviewer Resources
CPA Job Board
Overview
Search for Ads
Place an Ad or Résumé
Classified FAQs
Manage Ads
Ad Rates
Resources
Overview
Find a CPA
Media Kit
Knowledge Hub
Financial Literacy
Diversity and Inclusion
Good4Business
Disaster Recovery
CPA License Lookup
Licensure
Governmental Accounting White Papers
CalCPA Member Logo
Home
Resources
Ask a CPA
Saving
Investing
How to Select the Right Investments for the Right Goals
Print
Email
Share
How to Select the Right Investments for the Right Goals
When it comes to investing, there’s no one-size-fits-all strategy. Your specific strategy will vary depending on your stage in life, financial resources and, most importantly, specific goals, emphasizes the California Society of CPAs
(www.calcpa.org).
Clarifying your goals is key to the effective implementation of any investment plan. For example, are you trying to save for retirement, a new home, or college tuition? If you would like to save for all three goals, prioritize them and set a time frame for each. Recognize that you will have more time to save for some goals than others. Financial goals are generally classified as short, medium and long term. Knowing how long you have until you need the money for each goal will help you determine the appropriate investments.
Short-Term Goals Call for Low-Risk Investments
Short-term goals are generally defined as those that you hope to achieve within one to three years. Examples of common short-term goals include paying off credit card debt, going on a vacation, making a down payment on a ca, and taking time off from work to care for a new baby. If you have more than one or two short-term goals, you may need to prioritize them.
Low-risk cash equivalent accounts such as a passbook savings or money market accounts are generally the best investment options when working within a short time horizon. Other conservative possibilities include Treasury bills with a maturity of one year or less and bank certificates of deposit. These safe options generally garner lower returns than riskier investments.
Stocks or mutual funds, which tend to fluctuate greatly, may not give you the return you need in the short term. It is possible that you could lose money if you had to sell your investment at a time when the market is down.
Medium-Term Goals Require Conservative Investments
Medium-term goals fall in the three- to five-year range. For these goals, such as saving for a down payment on a house, a conservative approach remains the best strategy. The higher return you might earn by investing in stocks may not be worth the risk that the market may fall right around the time you need the money.
When investing for this term, most CPAs would agree that longer-term CDs, short-term bonds, and Treasury notes would be appropriate investments. Keep in mind that as your financial goal gets closer, you should consider moving funds into cash equivalent investments.
Long-Term Goals Allow for More Growth
With a long-term goal, such as saving for your child’s college education or your own retirement, time means more flexibility. You can invest in growth assets, such as stocks, which tend to fluctuate more but produce a greater return over time. Unlike more conservative investments, stocks help to outpace inflation, an important consideration when investing for long-term goals. And since you have time to weather short-term ups and downs in the market, the risk is reduced.
When investing for the long-term, the way you allocate your assets among the different types of investments takes on increased importance. In fact, most CPAs would agree that choosing the right mix of stocks, bonds, and cash equivalents is the single most important factor for successful investing. Of course, as you move closer to the time when you’ll need the money, you’ll want to reallocate your assets toward more conservative investments.
Refine Your Investment Strategies Often
If you’re like most people, your financial goals will shift throughout the course of your life. It’s important that you review your goals and investments regularly to ensure that they reflect your changing needs. A CPA can help you formulate an effective investment strategy.
Powered by Azure Servers