Ask Bob: Is it a Good Idea to Invest in Stocks for a Short-term Goal?

Autumn Campbell, a certified financial planner with The Planning Center, discusses whether to invest in stocks for a goal with a short-term time horizon -- a down payment on a house.
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Question

I was hoping you give me some guidance on investing in stocks. My boyfriend and I are looking to buy a home within the next year and a half and we wanted to invest in some short-term stocks. Any recommendations or advice?

Answer

The short answer is this: Don’t invest money in stocks that you’ll need in the next two years, says Autumn Campbell, a certified financial planner with The Planning Center.

That money should be invested in accounts and investments that provide safety of principal and liquidity. In essence, you don’t want to put money at risk that is intended for a goal with a short-term time horizon.

Once you have saved up enough for the down payment on your home, you can start investing based on your risk tolerance, says Campbell.

She recommends a diversified investment such as a mutual fund or ETF rather than individual securities. “The Vanguard LifeStrategy Funds are fantastic diversified funds that maintain a target-risk allocation for those starting out with their investment journey,” she says.

Generally, by the way, you would invest in safe investments such as CDs and money market funds for goals with a short-term time horizon and riskier investments such as stocks for goals with a long-term time horizon.

Also of note, TheStreet offers two educational courses that might be of interest, one of which is an introduction to investing by Jim Cramer.

Got questions? Get answers

Got questions about money, Social Security, Medicare, retirement accounts? Get answers. Email Robert.Powell@TheStreet.com.

Question

I was hoping you give me some guidance on investing in stocks. My boyfriend and I are looking to buy a home within the next year and a half and we wanted to invest in some short-term stocks. Any recommendations or advice?

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