Saving for your next big step with shorter-term investing

Explore some simple but effective approaches to shorter-term investing that could help you become financially savvy, and help you achieve your goals.

3 minute read

When life brings a big change your way, it’s always best to be ready for it. A big part of being prepared is making sure you have the funds you need, available when you need them. If you’re investing with a shorter-term time-frame, it pays to think about how soon you’ll need to access your money - and the best place to keep it until you’re ready to put it to good use.

If you’re just getting into investing – or if you’re coming to the end of a longer-term investment – read on to find out the biggest things you need to consider.

Start by thinking about your time frame

Whether you’re close to retirement, saving for your kids’ education, or gearing up to buy your first home, give some thought to your time-frame. When are you likely to need to call on your investment? With shorter-term investments, there’s sometimes less time to recover from the market’s ups and downs. So being aware of your timeline, keeping an eye on things, and making the right choices are super important.

Set a goal and keep track of your progress

Think about your financial goal. Once you’ve got a fairly clear idea of how much you need to save, figure out how much you’ll need to put in to make it happen. Next, be sure to check in regularly. If it doesn’t look as though your investment is making the progress it needs to, think about what changes you might need to make to get it back on track. That might mean changing how much you regularly invest, adding in the odd lump sum, or prioritising investing over other big expenses – like nice-to-have home renovations, or a holiday. It’s also worthwhile checking your investment choice matches your needs, as well as your investment timeframe. If you’re saving for retirement, visit sorted.org.nz to find out how much you’ll need to fund the retirement you want.

Check that you’re investing in the right sort of fund

If you’re nearing the end of a long-term savings effort, your balance could be a lot larger than when you first started. This is great – but if you're now focused on using that money in the short term it may be time to consider a less risky investment option to help lessen the impact of any market volatility. For example, a 20 percent downturn could be more devastating for you now if you are closer to needing the money than it may have been earlier on, when you first started your investment. And now that you’re closer to calling on your investment, it will have less time to bounce back.

That means, it’s important to review your choice of fund at least once a year. If you’re in a higher-risk growth fund, think about whether you’re comfortable with the possibility of weathering a loss at this late stage. If not, consider whether a lower-risk balanced or conservative fund might be right for you.

What to do if you’ve already hit your savings goal

If you’ve already managed to save as much as you aimed for, well done! Now that you’ve reached your goal, you might like to shelter your investment from any potential drops in the market by moving it to a lower-risk fund - just as you would if you hadn't quite got to your goal. Even though you’ve reached your target amount, you could also continue contributing to your investment, to top it up even further. You could even look at starting a new investment for a new goal. Just make sure any financial decisions take into account your time-frame and risk appetite.

Whether you’re looking to make a shorter-term investment, or nearing the end of your longer-term saving efforts, there’s plenty to consider. Making sure you’re clear on your timeline and goals – and contributing the right amount to the right fund – is key. So start planning today, and set yourself up to make your shorter-term financial goals a reality.

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