When you have more than a few years on your side, investing — rather than saving — for a goal might be the path to success. The market’s potential for higher long-term returns could mean you need to set aside less to meet your goal than if you put your money into a savings account or CD. Keep in mind, however, that there is additional risk with investing and, unlike many bank products, your money is not insured and you can lose money.
Some goals, like paying for a child’s college education, have a specific deadline. Others, such as the resources to start your own business, may be more flexible. How much time you have before you’ll need your money will play a big role in identifying your best investment strategy, as well as how much risk is right for you.
Because life changes, it’s a good idea to periodically reassess your goal. A shift in what your goal looks like, such as deciding to add an extension on your home rather than just remodeling the kitchen, could create a gap between what you have and what you’ll need. Or, you could discover that you’ll reach your goal sooner than you thought.
If you’re investing to pay for a child’s college education and related expenses, look into tax-advantaged 529 college savings plans. (Tax-advantaged treatment applies to savings used for qualified education expenses. State tax treatment varies.) A Coverdell Education Savings Account is another tax-advantaged option that might make sense for your investing strategy.
Sometimes it’s challenging to stick to your plan, particularly when facing well-meaning — but off-target — advice.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
This material does not constitute legal or tax advice. Investors should consult with their legal or tax advisors.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
American Funds Distributors, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.