How Should I Invest for Goals Besides Retirement?


We know we should be saving for short-term goals like that beach vacation and for emergencies and investing for that ultimate long-term goal of retirement. But it’s a little less clear what we should be doing with cash we need for all that time in between. (You know, life.)

Turns out, we should still be investing—even if our financial goals aren’t so far off.

But isn’t investing risky?

It’s true that investing comes with risks—but so does not investing.

The biggest threat is inflation, or the overall increase in the price of popular goods and services. “Inflation is going to eat away at your money like termites would eat a house. It’s slow, and you don’t notice it all at once, but suddenly your house is about to crumble,” says Stacy Francis, Certified Financial Planner and CEO of Francis Financial in N.Y. “If you leave [your savings] in cash, it doesn’t become a problem until five or 10 years down the line when you need it and realize it’s worth [less] of what it used to be.”

That’d be less of an issue if you could earn a good return on your cash by leaving it in the bank. But savings accounts currently have an average yield of just 0.06 percent, according to the latest FDIC survey. While the consumer price index (which measures price changes in consumer goods and services like gas, food, clothes and cars) was up 2.7 percent in February, compared to last year.

By not investing, you could also miss out on compounding (essentially, when the money you earn starts earning money, too). Investing early gives your money time to grow—then gives that new money time to grow, too.

Sold. When can I start?

After you’ve squared away a few other priorities, like setting a budget that helps you spend less than you earn, pay down any debt quickly and squirrel away money for emergencies. That ultimately gives you the flexibility to earmark some money for investing—allowing you to have more confidence and handle greater risks. Keep in mind that it doesn’t take a lot of money to start investing. (Micro investing apps like Acorns let you invest as little as $5.)

Okay, I’m ready. How do I get started?

Set goals for your investments and determine what type of account is best. For most, you can just stick with a regular brokerage account. But if you’re saving now for your kid’s future college expenses, you might also open a 529 plan.

Next, plot out your timeline. College for a newborn might be 17 years away—then you’ll have a few years to draw down the balance. On the other hand, if you’re saving for a home, you’ll probably need to withdraw the money at once when you’re ready, though you may have some flexibility around when you make the purchase. Other goals could range from saving for a new car or a wedding that’s a few years away to putting away enough money now to start your own business later.

Knowing your target date helps inform your asset allocation. Francis recommends a portfolio consisting of 70 to 80 percent stocks for goals more than five years away. As you get closer to your deadline, you can switch to a more conservative portfolio, so that you’re more heavily invested in bonds than stocks.

What should I do as my target date approaches?

At around the five-year mark, you can start adjusting down your risk. Typically this means switching from stocks to bonds, though Francis suggests dialing it back in more subtle ways, too.

Within your stock holdings, you can lighten up on higher-risk foreign stocks, such as those in emerging markets. Then do the same for small-company stocks, opting instead for higher quality, large-company stocks. You may also consider moving into more dividend-producing stocks, which provide additional income.

As for bonds, Francis recommends moving from long-term to shorter-term bonds, and making sure you’re well-diversified. (Investing in bond funds or ETFs rather than individual bonds is a good way to do that.) “Everybody talks about being diversified with their stocks, making sure they don’t have all their eggs in one basket,” says Francis. “That advice is also important for your bonds.”

By the time you near your goal, a more conservative portfolio would be about 70 percent bonds, 30 percent stocks, says Francis—meaning you’re still holding some stocks till the end. After all, stocks generally provide the greatest returns, which is what investing is all about (although they also carry the most risk).

“You worked hard to put this money away; your money should also work for you,” says Francis. “Your money is an engine to help propel you forward to your goals. Do you want an engine that’s in a Lamborghini, or do you want an engine that’s in one of those Barbie Corvette cars for 2 year olds? I know which I would prefer.”

acorns+cnbcacorns cnbc

Join Acorns


About Us

Learn More

Follow Us

All investments involve risk, including loss of principal. The contents presented herein are provided for general investment education and informational purposes only and do not constitute an offer to sell or a solicitation to buy any specific securities or engage in any particular investment strategy. Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

Any references to past performance, regarding financial markets or otherwise, do not indicate or guarantee future results. Forward-looking statements, including without limitations investment outcomes and projections, are hypothetical and educational in nature. The results of any hypothetical projections can and may differ from actual investment results had the strategies been deployed in actual securities accounts. It is not possible to invest directly in an index.

Advisory services offered by Acorns Advisers, LLC (“Acorns Advisers”), an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Brokerage and custody services are provided to clients of Acorns Advisers by Acorns Securities, LLC (“Acorns Securities”), a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Acorns Pay, LLC (“Acorns Pay”) manages Acorns’s demand deposit and other banking products in partnership with Lincoln Savings Bank, a bank chartered under the laws of Iowa and member FDIC. Acorns Advisers, Acorns Securities, and Acorns Pay are subsidiaries of Acorns Grow Incorporated (collectively “Acorns”). “Acorns,” the Acorns logo and “Invest the Change” are registered trademarks of Acorns Grow Incorporated. Copyright © 2019 Acorns and/or its affiliates.

NBCUniversal and Comcast Ventures are investors in Acorns Grow Incorporated.