Establishing Savings Goals and Investment Choices

When comparing the different types of banking products available, whether they be checking accounts, money market accounts, CDs or even money market funds or Treasury bills, is it always prudent to determine your financial goals as a first step to successful investing and finding the account with which you are most comfortable.

You may have immediate goals or long-term goals or simply evaluating which accounts serve your bill paying and record keeping needs.

Generally, your goals will dictate how much risk should be in the investment, the level of liquidity and the time you have to invest. Once an investor has established their investment goals and needs, a realistic investment plan that includes checking accounts, CDs and money market accounts can be designed to meet these goals. A realistic expectation about investment returns and about market performance is an important part of any cash allocation decisions.

Long term goals should be separated from short term savings needs. Typically, a shorter time frame necessitates conservative investments, while a longer period allows you to handle more risk. Remember, investments that increase in value in a short period can just as quickly decrease in value. But if you’ve considered the risk/reward tradeoff, you know that investment volatility is a characteristic of a successful long-term plan. Establish your goals and create an investment plan now the sooner you begin saving money with your bank and investing in the right type of accounts, the longer your money has to work for you and the greater the value of compounding accrued interest will become.

High yielding money market deposit accounts, low cost checking accounts, high rate CDs and money market accounts can be appropriate investments for a variety of investment goals. Throughout our changing financial needs, most individual investors will com across the need for savings that can include making a down payment on a home, paying for a wedding, retirement or creating an emergency fund.

In preparation for retirement or managing your funds while in retirement, individuals should use a combination of sources to fund retirement, which may include Social Security benefits, employer-sponsored retirement plans-like 401(k) plans, Individual Retirement Accounts (IRAs) and personal savings. To maintain diversification and liquidity, personal savings should include a measurable level of funds in bank accounts, CDs and money market funds.

Since investment securities don’t always rise in value, and when they fall, the downturns can sometimes be lengthy, every investor should keep a keen eye on the returns provided by CDs and money market funds. A well-conceived, diversified personal investment plan can help you weather these downturns, and give you a measure of comfort when market volatility occurs.

Emergency reserves are assets you may need unexpectedly on short notice. Many investors use bank accounts and bank products like high yielding CDs for their emergency reserves and short term investing goals.

This entry was posted on Sunday, October 12th, 2008 at 11:25 am and is filed under Banking and CD Guide. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.