Best Types of Short, Intermediate, and Long Term Investments

There are a dizzying number of investment options. Choosing the right one depends on your goals and needs. Below are some of the most common investment accounts that will meet your money goals for the short, intermediate, and long term investing.

Short-term Investments (3 years or less)

1. Online savings or money market account

If you need access to your money, the bank remains the safest place to save it. For higher interest rates, consider opening an online-only savings account. You can also choose a money market account. Interest rates are not excellent but your money is insured by the FDIC and withdrawals are penalty-free.

2. Short-term certificate of deposit (CD)

Access to your money will be limited if you place it on a CD but it is only for a short time. With a CD, you agree to keep your money in the bank for a specified length of time in exchange for a higher interest rate. You earn more in the interest the longer you keep it there and the higher the balance. It is possible to find a CD for as short as one month.

Intermediate Investments (3 to 10 years)

1. Long-term CD

These CDs promise a return of up to 3.5%. It is income that you can rely on. Rates are highest if you make a sizeable deposit.

2. Short-term bonds and funds

Buying bonds means lending money to the government for a specific term in exchange for periodic interest payments. Check out US Treasury bonds with one or two-year terms or high-rated corporate bonds that offer up to 3% in return.

3. Peer-to-peer loans

Similar to bond investing, peer-to-peer investing is buying debt in exchange for a return, but to an individual instead of the government or a corporation. This kind of lending comes with the risk that loans will default but a sensible and diversified strategy can usually result in positive returns.

4. Low volatility stocks and index funds

Stocks are a good investment if you have a long term strategy. Look for stocks that maintain relatively stable share prices through good and bad times to lower your risk.

Long-term Investments (10 years and above)

1. Individual stocks

With a longer time horizon, you can expand your risk tolerance and receive up to a 7% annual return. Choose individual stocks from large, diversified companies that have shown a consistent track record and increasing profits over time. Stocks go up and down but if you are saving for the long-term, your investments are sure to rebound.

2. Index funds and ETFs

Invest in the stock market itself! They are usually passively managed and have low expenses, and are an easy way to build a diversified portfolio.

3. Actively managed funds and ETFs

These generate better returns because they are actively managed. Actively managed funds have higher expense ratios than index funds and can give you good money for the long-term if you invest in a fund with a good track record.

4. Robo-advisors

These are the newest innovation in investing. You hand control of your portfolio to a company that manages robo-advisors. They invest according to your goals and risk tolerance. Robo-advisors are found online and will manage your investments in an automated way. They will do rebalancing, security, and even taxes. Compared to human financial advisors, robo-advisors are sure more affordable and a good investment!