Skip to Content
Tally logo

Investing for Mid-Term Financial Goals

Investing for retirement is one thing, but what about investing for mid term goals like a downpayment or a wedding? Find out a few solid strategies inside.

October 7, 2021

When it comes to financial planning, you’ve probably heard the following: 

Saving up for retirement is important, investing in stocks is a good way to build long-term wealth and, for short-term savings, investing in the stock market can be a risky decision. 

But what about mid term goals? Is it wise to invest your savings for expected expenses in the next few years?

What is a mid term goal?

For starters, it’s helpful to define exactly what a mid term goal is. 

Generally speaking, a mid term financial goal is an upcoming expense that will take place somewhere in the next three to ten years. 

As for specific mid term goals, they can be just about anything you’re saving money for. A few examples of mid term goals include saving for a:

Good mid term goals can be anything you truly value and want to save for. They’re highly specific to your individual lifestyle and goals. 

Should you invest for mid term goals?

Should you invest money for your mid term financial goals, or should you simply keep the funds in a checking account? That answer depends on a number of different factors. 

Some questions to ask yourself before investing include:

  • How far out are your financial goals? The savings strategy for an expense that’s two years away is probably different for an expense that’s eight years away.

  • Are the goal dates set in stone, or can they be delayed if needed? If you’re flexible with when the expense comes due, you can be a bit more aggressive with your investment strategy. 

  • What is your risk tolerance? Investing carries risk; if you’re not comfortable with the risk of losing money, it’s wise to choose more conservative investments.

  • Do you need a high return to meet your goal? If you save enough each month, you won’t necessarily need a high rate of return to meet your financial goals. 

Investment strategies for mid term financial goals

If you do decide to invest, what are the specific investment types to consider? 

There are a wide variety of investment options out there. The list below covers some of the most popular ones.

Savings accounts

Savings accounts might not be sexy, but they’re reliable, simple and virtually risk-free. In today’s interest rate environment, most banks pay very little interest on savings accounts. However, you can look into high-yield savings accounts, which may pay slightly higher interest on your savings. 

Certificates of deposit

Otherwise known as CDs, certificates of deposit are like short-term loans you make to your bank. You deposit a certain amount of money for a certain amount of time and the bank pays you a higher rate of interest than you would get with a normal savings account. CDs are available in terms ranging from three months to five years, but you can’t withdraw the funds before the end of the agreed upon time period. 

Bond index funds

Bonds are financial products sold by governments and private companies. You can buy a bond for a set amount of money and the seller agrees to pay you back in a set period of time — with interest along the way. Individual bonds carry some risk, as the company or even government could go bankrupt

Bond index funds are a somewhat less risky alternative, as they allow you to buy small pieces of hundreds of different bonds all at once. One example of a bond index fund is BND, an Exchange Traded Fund (EFT) from Vanguard that has returned 3.36% per year over the last ten years.

Stock index funds

Stocks are shares in a specific company. Basically, you buy stock in a given company, own a very small piece of that company, then receive dividends and (hopefully) see your stock grow in value. 

Stock index funds allow you to purchase a basket of hundreds of stocks all at once, which helps reduce your level of risk. One example of a stock index fund is VOO, an ETF from Vanguard that includes shares in the 500 largest publicly traded firms in America. VOO has returned 14.8% per year over the last ten years.

Target date funds or all-in-one funds

All-in-one funds are ETFs or mutual funds that typically invest in a combination of stocks and bonds. They can be very conservative (90% bonds, 10% stocks) or very aggressive (90% stocks, 10% bonds) — and everything in between. 

Some are available as “target date funds,” which get more conservative as the target date approaches. For example, a 2040 target fund would be fairly aggressive today, but would ramp up its percentage of bonds each year, reducing risk as 2040 approaches.

Check out this investing guide for further information on the above types of investments, plus a few more. 

Find the right mix for you

Every individual has their own risk tolerance, goals and investment preferences. Ultimately, it’s up to you to find a balance that works for you. You can also speak with a financial advisor to receive customized advice, depending on your specific financial situation. 

If you’re stuck, consider this: it doesn’t need to be an all-or-nothing approach. 

In other words, you can employ a mix of investment strategies to help meet a variety of financial goals, such as: 

  • Investing in the stock market to hopefully improve your returns

  • Investing in bonds to receive moderate returns with less volatility 

  • Investing in CDs or high-yield savings accounts to have risk-free investments

  • Keeping funds in savings/checking accounts for unexpected expenses

Finally, when taking steps to improve your financial future, remember that it’s just as important to pay off your debt as it is to invest. 

With Tally, you can roll your credit card debt into a single monthly payment, getting a headstart on your financial goals. 

​​†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.