Time Horizon

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When do you need the money?

Generally, the longer your time horizon, the more risk you can take on. Why? Because if you don’t need the money any time soon, you can afford to sit tight and ride out any down periods in the financial markets.

As a general rule — and it will vary depending on individual circumstances — if you will need the money:

  • In 2 years or less, consider safe investments such as short-term CDs and money market funds.
  • In 2-5 years, consider short term bond mutual funds or mid-term CDs.
  • In 5-10 years, consider a mix of stocks and bonds, plus long-term CDs.
  • In more than 10 years, consider making stocks or stock mutual funds a higher percentage of your overall portfolio.

As with all rules, there are exceptions, especially if you’re approaching retirement or are already retired. With increased life expectancies, you may be retired for 20 to 30 years or more. But if your retirement nest egg is your primary source of retirement income, you likely don’t want to put it all into stocks. Rather, you want a way to protect the money while generating the highest income possible.    More

For many people the new generation of CDs — such as the Dollar Bank CD Ladder — provide the right balance of protection, growth and steady income.

And don’t forget, your money isn’t all targeted toward a single goal. To meet a range of needs with different time horizons, you may want a selection of long-, mid-, and short-term investments as well as a reserve you can tap in case of emergencies. For more, see Financial Life Cycle, Asset Allocation, and Diversification.