{"id":245718,"date":"2012-01-24T03:14:04","date_gmt":"2012-01-24T10:14:04","guid":{"rendered":"https:\/\/www.getrichslowly.org\/?p=245718"},"modified":"2023-09-21T15:15:18","modified_gmt":"2023-09-21T21:15:18","slug":"invest-long-term","status":"publish","type":"post","link":"https:\/\/www.getrichslowly.org\/invest-long-term\/","title":{"rendered":"Where should I invest for the long term?"},"content":{"rendered":"<p>Got long-term savings to invest? We&#8217;ll help you figure out where to put it. But first, let&#8217;s talk about what long-term savings means.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"what-is-%e2%80%9clong-term%e2%80%9d-savings\"><\/span>What is &#8220;long-term&#8221; savings?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>Bond investors consider anything&nbsp;<strong>10 years and over<\/strong>&nbsp;to be &#8220;long-term.&#8221;<\/li>\n<li>Many regular consumers think of long-term savings as something that won&#8217;t need to be accessed in the&nbsp;<strong>next five years<\/strong>.<\/li>\n<\/ul>\n<p>But instead of getting technical with the length of time, let&#8217;s think about the sorts of reasons we might be saving long-term:<\/p>\n<ul>\n<li>For&nbsp;<strong>retirement<\/strong>; the length of time will depend on your age and how much you want to save.<\/li>\n<li>For&nbsp;<strong>college<\/strong>; it will be pretty obvious, based on your children&#8217;s ages, how long you&#8217;ll need to save! We&#8217;ll assume your children aren&#8217;t in high school yet if you&#8217;re thinking of their college funds as long-term savings.<\/li>\n<li>For a major purchase, such as&nbsp;<strong>buying a home<\/strong>&nbsp;or&nbsp;<strong>starting a small business<\/strong>. If you&#8217;re planning at least five years out to save up a down payment for a home or other major purchase, we&#8217;ll classify that as long-term savings.<\/li>\n<\/ul>\n<p>What shouldn&#8217;t be considered long-term savings: your&nbsp;<a title=\"How to Start an Emergency Fund\" href=\"https:\/\/www.getrichslowly.org\/emergency-fund\/\">emergency fund<\/a>, a savings account to buy something like a car, or anything you&#8217;ll need to access in the next few years.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"where-should-you-invest-long-term-savings\"><\/span>Where should you invest long-term savings?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>With long-term savings, you have more flexibility than with short-term savings, and along with that, most long-term investors have more&nbsp;<a title=\"What is your risk tolerance?\" href=\"https:\/\/www.getrichslowly.org\/risk-money-stock-market\/\">risk tolerance<\/a>. In other words, since you won&#8217;t have to access your funds for many years, you don&#8217;t freak out if some years, your investment temporarily drops in value.<\/p>\n<p>Why? Because historically the&nbsp;<a title=\"Investing 101: Average Return is not Normal\" href=\"https:\/\/www.getrichslowly.org\/investing-101-average-is-not-normal\/\">average return<\/a>&nbsp;of stock market investments, over many years, has been positive. So, while short-term savings might be better off in a money market fund or a CD, long-term savings might be more appropriately invested in index funds, mutual funds or bond funds.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"the-type-of-investment-depends-on-your-goals\"><\/span>The type of investment depends on your goals<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As with any investment, it&#8217;s important to find the right vehicle to fit your goal.<\/p>\n<ul>\n<li>For<strong>&nbsp;retirement&nbsp;<\/strong>and other investments that will need to produce income many years from now, choosing a&nbsp;<a title=\"Tax-deferred accounts\" href=\"https:\/\/www.getrichslowly.org\/all-about-asset-location-how-to-make-the-most-of-your-accounts\/\">tax-deferred account<\/a>&nbsp;such as a traditional IRA or 401(k), or a&nbsp;<a title=\"How to Start a Roth IRA and Where to Do It\" href=\"https:\/\/www.getrichslowly.org\/how-to-start-a-roth-ira-and-where-to-do-it\/\">Roth IRA<\/a>&nbsp;with tax-free withdrawals (under certain rules) is the best option for most consumers. Once the account is established, most experts suggest selecting an assortment of mutual funds &#8211; especially&nbsp;index funds&nbsp;&#8211; and bond funds that will match your desired return with your ability to accept risk.<\/li>\n<li>For&nbsp;<strong>home purchase<\/strong>&nbsp;accounts and other short-term goals where you&#8217;re building up a lump sum (like a down payment), a more conservative approach is sensible. Many Get Rich Slowly readers suggest a&nbsp;<a title=\"Best Way to Save for a Down Payment\" href=\"https:\/\/www.getrichslowly.org\/best-online-high-yield-savings-accounts\/\">high-yield savings account<\/a>&nbsp;which pays higher interest than a regular bank savings account, or an assortment of CDs called a &#8220;<a title=\"Cashing in on CDs\" href=\"https:\/\/www.getrichslowly.org\/best-cd-rates\/\">CD ladder.<\/a>&#8220;<\/li>\n<li>For&nbsp;<strong>college savings<\/strong>, most states offer tax-deferred or tax-exempt savings plans called&nbsp;<a title=\"Savings for College\" href=\"https:\/\/www.getrichslowly.org\/college-savings-the-basics-of-saving-for-college\/\">529 plans<\/a>. These are often the best choice thanks to the tax break; but some have a lot of restrictions and a few have had fund management scandals, so you should do your homework on your own state&#8217;s plan. If your children are still quite young, many of the same investments typically chosen for retirement accounts could be a good choice (like index funds). As your kids grow, consider moving more of their college savings into conservative investments such as CDs and high-yield savings.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Got long-term savings to invest? We&#8217;ll help you figure out where to put it. But first, let&#8217;s talk about what long-term savings means.<\/p>\n<h2>What is &#8220;long-term&#8221; savings?<\/h2>\n<ul>\n<li>Bond investors consider anything&nbsp;<strong>10 years and over<\/strong>&nbsp;to be &#8220;long-term.&#8221;<\/li>\n<li>Many regular consumers think of long-term savings as something that won&#8217;t need to be accessed in the&nbsp;<strong>next five years<\/strong>.<\/li>\n<\/ul>\n<p>But instead of getting technical with the length of time, let&#8217;s think about the sorts of reasons we might be saving long-term:<\/p>\n<ul>\n<li>For&nbsp;<strong>retirement<\/strong>; the length of time will depend on your age and how much you want to save.<\/li>\n<li>For&nbsp;<strong>college<\/strong>; it will be pretty obvious, based on your children&#8217;s ages, how long you&#8217;ll need to save! We&#8217;ll assume your children aren&#8217;t in high school yet if you&#8217;re thinking of their college funds as long-term savings.<\/li>\n<li>For a major purchase, such as&nbsp;<strong>buying a home<\/strong>&nbsp;or&nbsp;<strong>starting a small business<\/strong>. If you&#8217;re planning at least five years out to save up a down payment for a home or other major purchase, we&#8217;ll classify that as long-term savings.<\/li>\n<\/ul>\n<p>What shouldn&#8217;t be considered long-term savings: your&nbsp;<a title=\"How to Start an Emergency Fund\" href=\"https:\/\/www.getrichslowly.org\/emergency-fund\/\">emergency fund<\/a>, a savings account to buy something like a car, or anything you&#8217;ll need to access in the next few years.<\/p>\n","protected":false},"author":3092,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[492],"acf":[],"_links":{"self":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/posts\/245718"}],"collection":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/users\/3092"}],"replies":[{"embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/comments?post=245718"}],"version-history":[{"count":0,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/posts\/245718\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/media?parent=245718"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/categories?post=245718"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}