Investing 101: Meeting Middle-Term Goals with Investments

When we think about investing, our minds tend to go straight to retirement. 

But, for many of us, that’s at least a few years off. And, if you’ve thought strategically about the types of goals we want to fund throughout your life, you’ve probably realized that retirement is just one of your goals. 

If money is a tool that you use to reach your goals, then there should be money strategies—investing strategies—that meet each type of goal, right?  

For example, you probably know that saving money is an excellent way to fund very short-term goals (e.g., maintaining an emergency fund, or large purchases within the year). On the other hand, we also know that investing in retirement accounts (or similar long-term investment accounts) is a great way to fund long-term goals—those with due dates potentially decades away.  

But what about those goals that have more of an intermediate timeline?  

Let’s talk about middle-term investments that can help you effectively fund those middle-term goals.  

Why focus on middle-term investing?   

Before we answer that question, let’s consider the types of middle-term goals you may have on your mental back burner.  

Middle-term goals, generally speaking, are larger purchases that you and your family are considering in the next 5-20 years. These may include things like a down payment for a home, tuition for children, vacations, new cars, or even second homes.  

Funding these goals requires a good amount of strategy.  

And, as it turns out, there are drawbacks to keeping the funds for these goals in a regular savings account—or an IRA.  On the one hand: If you’re consistently keeping a lot of money—an amount that could buy your family a second home—in a savings account, you’re missing out on the power of compound interest. 

On the other hand, if you take the money for these middle-term goals out of IRAs early (before 59.5, for most investors), you could accrue penalties.  

By focusing on other investment accounts that don’t have those penalties, you can sidestep those issues, benefit from investing, and still access your funds to fuel your goals whenever you want.  

What types of investment accounts pair well with middle-term goals? 

The short answer to this question is simple: Taxable investment accounts.  Taxable accounts themselves are also very simple, although they’re not as well-known as IRAs like Roths or 401(k)s.  

This type of financial product is an investment account you can access whenever you want. This benefit comes with a trade-off: As their name suggests, these accounts are subject to taxation—again, unlike investment accounts that come with tax benefits, like Roths or 401(k)s. 

The most popular type of ‘middle-term’ taxable investment accounts are brokerage accounts. When investors open a brokerage account, they deposit money with a licensed brokerage. That firm then executes trade orders on behalf of the investor. The assets always belong to the investor, and they must claim any capital gains as taxable income.  

Your financial advisor can help you navigate taxable accounts further, but the broad overview is this: With taxable investment accounts, you can reap the benefits of investing while maintaining access to your money—a perfect setup for meeting your middle-term goals.  

How can I get started with middle-term investing?  

Getting started with middle-term investing is simpler than you might think. We recommend:  

• Identifying your middle-term goals. 
• Getting in touch with a financial advisor. 
• Looking at your accounts and seeing what’s reasonable. 
• Setting up automatic contributions, if possible, to help build consistency. 

Interested in getting started? Reach out to a financial advisor at Commas today for friendly, accessible assistance as you work towards your middle-term investing goals!  

At Commas, we know that taking steps towards your financial goals can be both exhilarating and stressful. It’s our goal to take the complexity out of investing by giving you the information you need to make strategic choices. We’re also ready to meet you with accessible, friendly advice every step of the way. Connect with our team today to learn more about the support we’re ready to offer.  

Commas is a wholly-owned subsidiary of Truepoint Inc., a fee-only Registered Investment Adviser (RIA). Registration as an adviser does not connote a specific level of skill or training. More detail, including forms ADV Part 2A and Form CRS filed with the SEC, can be found at www.commas.devphase.io. Neither the information, nor any opinion expressed, is to be construed as personalized investment, tax or legal advice.