How to Invest Your Savings for Short- and Long-Term Goals

How to Invest Your Savings for Short- and Long-Term Goals

What to consider

Depending on how much risk you’re willing to take, there are a couple of scenarios that could play out:

  • No risk — You’ll never lose a cent of your principal.
  • Some risk — It’s reasonable to say you’ll either break even or incur a small loss over time.

There are, however, two catches: Low-risk investments earn lower returns than you could find elsewhere with risk; and inflation can erode the purchasing power of money stashed in low-risk investments.

If you opt for only low-risk investments, you’re likely to lose purchasing power over time. It’s also why low-risk plays make for better short-term investments or a stash for your emergency fund. In contrast, higher-risk investments are better suited for higher long-term returns.

3. FDIC-Insured Certificates of Deposit (CDs)

Certificates of deposit (CDs) are like loans you make to a bank. It will pay interest periodically over the term of the CD and return the full amount at the end. In exchange, you agree not to move the money for the term of the CD or pay a penalty if you do. CD terms typically range from six months to six years.

Pros: With the best CD rates, you are getting a higher rate that you would in most savings accounts. And the CD amount may count toward your bank balance to help you avoid the monthly fee.

Cons: You’re locking in your money at a fixed interest rate that may seem less acceptable if rates improve. Also, the best rates often require large minimums and long time frames.


Get prepared if you’re planning to invest

If it’s not time to invest yet, you may want to evaluate your financial priorities. One way is by using our My Money Map online tool — where you can track your spending, start a budget, and track savings in easy-to-understand charts.

Use My Money Map

Where to put your savings

There are many kinds of savings and investment funds. In general, lower-risk funds yield predictable but smaller growth. Higher-risk funds offer the potential for rapid growth, but you could also lose money as the market goes up and down.

A high-yield savings account is the least risky, because your money isn't invested in the stock market, but it still yields 16x more interest than the national average.

When you're ready to grow your money more aggressively, find a brokerage firm or robo-advisor that works for your lifestyle and personality. "Do you want to be more active in managing your investments, or do you want to set it and forget it?" asks McLay.

A simple app like Acorns links to your checking account and automatically invests spare change. Robo-advisors like Betterment and Wealthfront let you select the length of time for your savings goals and how much risk you want to take on, then you can set up an amount to invest every month. They are usually cheaper (with fees of about .01% to .25% of your earnings) compared to professional financial advisors who charge at least 1%. Other platforms like Ellevest charge membership fees instead of charging a percentage of your earnings.

If you want to take on more of the responsibility yourself, you can set up a brokerage account through firms like E*Trade, Fidelity, Charles Schwab or Vanguard.

"They're a little more work," says McLay. 

Other Types of Investment Strategies

As an investor, you may decide to add other types of investments to your portfolio. Types of securities you can add might be higher risk, but can compliment your index funds. Whatever other securities you decide to add, make sure you align them with your investment goals and do some research before to make sure you know what you’re investing in.

A small cap stock is one from a company with market capitalization under $2 billion. These stocks can be a way to invest in companies that are poised for long-term growth and fast gains. 

Adding small cap stocks to your portfolio through an index fund is a good way to incorporate small cap stocks to your investment strategy. A popular small cap index fund is the Russell 2000 index which tracks 2,000 small cap companies across a variety of industries. Of course, there’s no guarantee that a small company will survive, and initial performance isn’t a guarantee it will continue. 

Blue Chip Stocks

Blue chip stocks are shares of large, well-known companies that are household names – think Disney, Amazon, and Johnson & Johnson. These stocks are thought of as being reliable, safe, and able to weather economic downturns over the long-term. 

To identify blue chip stocks, take a look at the Dow Jones Industrial Average. Because they have a proven track record, having blue chip stocks can add stability and reliability to your portfolio. If you have an S&P 500 or total market index fund, chances are you have good exposure to these stocks already. A blue chip index fund or ETF is a good way to start investing in these. The SPDR Dow Jones Industrial Average ETF Trust is one of the most popular blue chip funds because of its low fees. You can also purchase shares directly through your brokerage. 

Real Estate and/or REITs

Buying a property often requires upfront costs like down payment and fees for closing, on top of any renovations you choose to make. There are also ongoing (and perhaps unexpected) costs, like maintenance, repairs, dealing with tenants, and vacancies if you decide to rent out the property. 

If homeownership isn’t for you, you can still invest in real estate through real estate investment trusts (REITs). REITs allow you to buy shares of a real estate portfolio with properties located across the country. They’re publicly traded and have the potential for high dividends and long-term gains. 

“REITs have done superbly well this year. They don’t usually do well with a pandemic, but surprisingly, they have,” says Luis Strohmeier, certified financial planner, partner, and advisor at Octavia Wealth Advisors. Part of the reason is you get access to properties, such as commercial real estate and multi-family apartment complexes, that could be out-of-reach for an individual investor.  

On the flip side, dividend payments earned through REITs are taxed as ordinary income instead of qualified dividends, which may cause you to have a higher tax bill if you invest through a taxable brokerage account. When you invest in a REIT, you’re also inherently trusting the management company to scout income-producing properties and manage them correctly. You don’t get a say in which properties the REIT chooses to purchase. But with that said, you don’t have to deal with tenants, repairs, or find a big down payment to start investing. And if you can invest through a tax-advantaged account, the dividends could grow tax-free. 

3. Your risk tolerance – How much financial risk are you willing to take?

Not all investments are successful. Each type of investment has its own level of risk — but this risk is often correlated with returns. It’s important to find a balance between maximizing the returns on your money and finding a risk level you are comfortable with. For example, bonds offer predictable returns with very low risk, but they also yield relatively low returns of around 2-3%. By contrast, stock returns can vary widely depending on the company and time frame, but the whole stock market on average returns almost 10% per year.

Even within the broad categories of stocks and bonds, there can be huge differences in risk. For example, a Treasury bond or AAA-rated corporate bond is a very low -risk investment, but these will likely have relatively low interest rates. Savings accounts represent an even lower risk, but offer a lower reward. On the other hand, a high-yield bond can produce greater income but will come with a greater risk of default. In the world of stocks, the difference in risk between blue-chip stocks like Apple (NASDAQ:AAPL) and penny stocks is enormous.

One good solution for beginners is using a robo-advisor to formulate an investment plan that meets your risk tolerance and financial goals. In a nutshell, a robo-advisor is a service offered by a brokerage that will construct and maintain a portfolio of stock- and bond-based index funds designed to maximize your return potential while keeping your risk level appropriate for your needs.

Five Ways to Double Your Money

Doubling your money is actually a realistic goal that most investors can strive toward and is not as daunting a prospect as it may seem initially for a new investor. There are a few caveats, however:

  • Be very honest with yourself (and your investment advisor, if you have one) about your risk tolerance; finding out you don't have the stomach for volatility when the market plunges 20% is the worst possible time to make this discovery and may prove very detrimental to your financial well-being.
  • Don't let the two emotions that drive most investors—greed and fear—have an adverse impact on your investment decisions.
  • Be extremely wary about get-rich-quick schemes that promise you "guaranteed" sky-high results with minimal risk, because there's no such thing. Because there are probably many more investment scams out there than there are sure bets, be suspicious whenever you're promised results that appear too good to be true. Whether it's your broker, your brother-in-law, or a late-night infomercial, take the time to make sure that someone is not using you to double their money.

Broadly speaking, there are five ways to double your money. The method you choose depends largely on your appetite for risk and your timeline for investing. You may also consider adopting a mix of these strategies to achieve your goal of doubling your money.

Corporate Bonds

If you want higher yields, consider corporate bonds. They generally offer more appealing interest rates but also carry more risk as few companies have the repayment record of Uncle Sam.

To ensure you’re making a safe investment, it’s important to review the rating on bonds. Matthews suggests looking at corporate bonds that are rated as investment grade, which usually means a rating of AAA, AA, A and BBB. Anything else might have even higher yields but also much greater risk.

It’s possible to purchase bonds via an online broker, but Matthews warns that many bond transactions charge higher fees than stock transactions.

To avoid fees and reduce the risk any one company defaults, look to bond mutual funds and bond ETFs, which invest in hundreds or thousands of company bonds. Most index-based ETFs and mutual funds will be available without trading fees from most brokerages these days, but it’s important to double check as well as to look out for load fees on mutual funds.


  • For the short term. Typically for smaller, shorter-term goals in the near future like saving for a large purchase or for an emergency.
  • Ready access to cash. A savings account gives you access to cash when you need it.
  • Involves minimal risk. Your funds are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per FDIC-insured bank, per ownership category.
  • Earn interest. You can earn interest by putting money in a savings account, but savings accounts generally earn a lower return than investments.
Compare savings accounts

2. Certificates of Deposit

Certificates of deposit are almost identical to savings accounts. Most are FDIC insured and so there’s zero risk involved. However, they are still liquid.

With a CD, you accept a time horizon when you invest — usually anywhere from one month to up to 10 years. Although a few CDs allow you to withdraw the money early without consequence, you generally must pay a penalty if you access your cash before the CD term ends. On the one hand, that makes CDs much less valuable for your emergency fund or savings.

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On the other, it should mean you’ll get paid a higher rate of return in exchange for that loss of easy access. Basically, banks will have an easier time reinvesting your savings if you’ve promised to leave them alone for a set amount of time. In return, you should be getting a better rate.

Before you get a CD, consider the following:

  1. Whether or not you might need that money before the CD’s maturation date. If the answer is yes, you’ll want to look elsewhere.
  2. Whether you really are getting a better interest rate than is available with high-yield savings accounts. Your only advantage with a CD over a savings account is getting better returns, so if you can find a savings account that pays better than the CD at your banks, there’s just no point.

That said, an FDIC-insured CD’s returns might seem modest, but they’re pretty stellar in the context of the near-total absence of any risk to you of losing money.

Bottom Line: CDs should offer higher returns than most savings accounts, but that comes at a loss of flexibility as you’ll owe a penalty for pulling your money out early.

Best For: Money you can be sure you won’t need for the prescribed time frame; investors with a stable financial picture looking to avoid any risk in their investments


Many investors consider gold to be the ultimate safe investment. Just remember, it can experience similar drastic price swings as stocks and other risky assets over the short term. Research suggests that gold may hold its value over the long term.

According to David Stein, a former fund manager and author of the investment education book “Money for the Rest of Us,” there are a few things to keep in mind with gold as a safe investment, depending on your needs.

“It can be a safe haven in that it’s protected against inflation over the long term, but it doesn’t protect you every year,” he says. “It’s a monetary asset, though, so it can help you diversify away from dollar-denominated assets, if that’s what you’re interested in.”

6. Municipal Bonds

Municipal bonds, which are issued by state and local governments, are a good option for slightly better returns with only slightly more risk. There’s almost no chance the U.S. government defaults, but there are definitely cases of major cities filing for bankruptcy and losing their bondholders a lot of money.

But most people are probably aware that a bankruptcy by a major city is pretty rare — though if you want to be extra safe you could steer clear of any cities or states with large, unfunded pension liabilities.

And because the federal government has a vested interest in keeping borrowing costs low for state and local governments, it has made interest earned on munis tax-exempt at the federal level. In some cases, munis are except from state and local taxes as well. So not only are they usually still safe, but they come with the added bonus of reducing your tax bill when compared with many other options.

Bottom Line: These debts issued by state and local governments are a little riskier than treasuries but come with the bonus of being untaxed at the federal level.

Best For: Taking on marginally more risk in pursuit of marginally better returns; investing while also keeping your tax bill as low as possible; investors looking for relatively safe bonds

What s the Single Best Way to Double Your Money?

It really depends on your risk tolerance, investment time horizon, and personal preferences. A balanced approach that involves investing in a diversified portfolio of stocks and bonds works for most people. However, those with higher risk appetites might prefer dabbling in more speculative stuff like small-cap stocks or cryptocurrencies, while others may prefer to double their money through real estate investments.

Opening an investing account

Opening an investment account often takes a matter of minutes and is fairly similar to opening a checking or savings account.

There are dozens of platforms to choose from, some of which have no minimum requirement to get started, making them perfect for young investors.

You’ll need to have the following when you set up your account (exact requirements will depend on the account you set up):

  • A sense of what your risk tolerance is.
  • Clear investing goals.
  • Social security number.
  • Contact information.
  • Marital status.
  • Driver’s license number (for some, but not all accounts).

How to build wealth with long-term investments

Building wealth requires diversification, an appropriate asset allocation and plenty of time. Here are some of the best ways to invest so you build wealth that lasts.

Stock ETFs and mutual funds

Exchange traded funds (ETFs) and mutual funds are funds that are made up of a collection of similar assets, such as stocks, bonds, commodities or other types of assets. ETFs can be bought or sold via a stock exchange, while mutual funds are typically purchased directly from the company that manages the fund.

Brian Bruggeman, who serves as director of financial planning at Baker Boyer, says exposure to the broad stock market over time via ETFs and mutual funds is one of the surest ways to build long-term wealth.

However, when you choose a strategy like this, it’s important to commit to it. Bruggeman says investors are often their own worst enemies, and that becoming comfortable with market ups and downs is essential to staying the course and letting your money compound.

As investors get more comfortable with their investment portfolio, Bruggeman adds, they can start taking more concentrated approaches to strategies that have a rationale for outperforming markets over time. This includes adding in concentrated ETFs and mutual funds that hold a smaller number of stocks with a higher exposure to each.

However, this investing option isn’t for everyone, and it’s definitely not for the faint of heart. “The value and momentum factors have outperformed the broader market over different periods of time, but require a level of conviction to stay invested in the strategy, because there will be times that those strategies underperform the market,” says Bruggeman.

Low-cost index funds

Low-cost index funds help you grow your money by keeping fees to a minimum. iStock

Index funds are typically funds that charge minimal fees and track a benchmark index, such as the S&P 500. Schulte says his favorite long-term investment is a basket of low-cost index funds invested in the global stock market.

He adds that, given current valuations, a basket of low-cost index funds would overweight small-cap value and international index funds, which are signaling higher expected future returns. “I don’t know exactly when those higher returns will show up, which is why these funds are in my long-term investment bucket,” he says.

Financial advisor Jeff Stark, a portfolio manager at MAI Capital Management, says investors who want to build wealth for the long term should consider index mutual funds (or even ETFs) that invest in indexes like the S&P 500 or the S&P 1500. “These can serve as the backbone of your equity portfolio,” he says.

Real estate, or REITs

Schulte also points to real estate as another great long-term investment. But since investing in a primary home typically produces lackluster returns after costs and inflation are factored in, he favors investing in publicly traded real estate investment trusts (REITs) for exposure to this asset class.

REITs contain a collection of income-producing real estate properties, allowing individuals to invest in real estate without actually having to own specific properties. Best of all, REITs let you invest in real estate using a taxable account or your retirement account without any of the hassle and stress that comes with being a landlord.

“REITs provide easy access to income-producing real estate around the globe and, historically, they have provided investors with healthy returns over long periods of time,” says Schulte.

While REITs are offered through any major brokerage firm, you could also try investing in real estate with a platform like Fundrise. This company offers its own private equity REITs with low fees and low account minimums.

What to Consider Before Investing and Why Long Term Investing is Key

As you begin your investing journey, consider first where you’d like to hold your investments. That could be a taxable brokerage account, an employer’s 401(k), or a tax-advantaged IRA. If you want to invest in real estate, decide if physical properties or REITs match your investment style. 

Then, assess your risk tolerance and how long you want to invest. Keep in mind that, due to compound interest, investing long-term (10+ years) is the most assured way to grow your money. 

It’s perfectly fine to invest entirely in low-cost, diversified index funds. “Adequately diversified investments with a long track record of growth is the key to building wealth,” says Stohmeier. That way, you’re also able to withstand market dips while giving your cash the best chance to grow.

The Foolish bottom line

Investing money may seem intimidating, especially if you’ve never done it before. However, if you figure out 1. how you want to invest, 2. how much money you should invest, and 3. your risk tolerance, you'll be well positioned to make smart decisions with your money that will serve you well for decades to come.

Bottom Line

Safe investments are largely some kind of loan to a bank, government or corporation. Often, the longer the loan, the higher the interest rate. Though that isn’t always the case. Some loans (or bonds) can be sold in a secondary market, offering another way to increase the return. Always be sure to enlist the help of a financial planner or financial advisor.


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