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INVESTING STRATEGY

What investment strategy do you recommend for short term goals (3-5 years)?

I am very new to investing. I began with the long term in mind - passive income, retirement etc. and all my reading has been focussed on that. What investment strategies would you recommend for a 3 to 5 year goal - such as for buying a car, future home renovations etc. If there are good resources, you recommend I read - I am most happy to do that as well.

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Laveena Lobo

13 May 2023

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Dave Gow - Strong Money Australia

INVESTOR

over 1 year ago

Hi Laveena, and welcome.

With such a short time frame – and 3-5 years is short – there isn’t a whole lot of sensible options which provide healthy returns. That’s because risk and return are linked. Those investments with the best long term returns face the most short term uncertainty and potential for losses. And even if it does work out well, the gains will be taxable to sell and buy a car etc.

High interest savings account is typically a good choice when working with a short term timeframe. The money is still earning a return, which is much better now thanks to higher interest rates, and it’s also very simple while it’s value is guaranteed.

Plus, it’s worth remembering that over a short timeframe, almost all of your money will come from savings rather than returns. So trying to squeeze out a bit more return often isn’t worth the risk associated. Stay focused on building your savings while your money earns some interest along the way.

Cheers, Dave

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