One thing we can all agree on is that, everyone wants to make money quickly, and as much as it is easier said than done, the reality is we spend most of our lives spending/saving money without any real science-based researched method (we go with our gut and hope for the best).
And so when the time comes for us to think about the future and what we want to accomplish in our lives whether in our 30’s, 40’s and 50’s, we tend to make the mistake of not working with a budget and identifying the right investing strategy for our financial goals. We face the obstacle of not knowing which goals are categorized as Short-term goals and which are considered Long-term and consequently we fail to invest accordingly.
The first thing to understand and comprehend is that there are many different kinds of investments, from bank savings accounts, CD’s (certificate of deposits), money-market mutual funds, bonds, stocks, real-estate or even gold, and defining each of these investments as short-term or long-Term will help us recognize the meaning and the difference behind short-term and long-term Investing. This will help us make the right decisions when it comes to reaching our financial goals and ultimately defining our investing style going-forward.
A. Long-Term Investing:
A long-term investment is an investment that is held for a period from one – three years at minimum. One great example is to invest in stocks, for example, as stocks provide a higher potential rate of return over time, allowing you a better chance of maintaining your purchasing power, Another long-term strategy, is to buy T-bonds. These are treasury bonds that have a fixed yield that tends to keep up with inflation.
B. Short-Term Investing:
A short-term investment is an investment that is held for a relatively short period of time, typically no longer than one year. I believe that the best way to go is to always save enough cash on hand for these short-term financial goals. Investing into 1-year certificate of deposits (Such as National Bank of Egypt CD of 18%) will guarantee the optimum return that will meet eventually your targets.
The bigger question you might want to ask, is how to reach your financial goals using BOTH short-term and long-term investing?
This question pushed me to make a framework for setting goals that can be applied to pretty much anything, ask yourself the following:
– Is it the right goal?
– Is it a realistic goal?
– Is it a reachable goal?
Start writing down all your personal and financial goals on a piece of paper, dumping all your thoughts and think where/what do you want to accomplish in 1 year, 5 years, 10 years, and then start allocating these goals in the correct corresponding timeframes and use the right investing tool in order to reach your goals in the fastest but also the safest way for you to enjoy your life without feeling any financial stress.
**So while this article was about which investing method to adapt, it might be fairer to say it’s about choosing both investing methods but more importantly, setting your personal specific goals FIRST**.
Building wealth across your portfolio before you’re in a position to want *anything* major is one of the best ways to guarantee you’ll actually be able to reach your goals. In doing so, you put time on your side. Waiting until your goal is crystal clear to begin working for it means unnecessarily delaying the compounding.
We tend to overestimate what we can accomplish in one year, but underestimate what we can accomplish in 10. Start today for whatever future you want 10 years from now.
