• filter:

Can you use the stock market as short term savings?

  • Page :
  • 1
  • Text Only
  • Search this Topic »
Voting History
rated:
Hello all, I'm trying to save some money for short term purposes (about 1-2 years), and am wondering if it's best to invest in the stock market or just using a savings account or some other type of bank account.  What do you all think?  If it's stocks I'd have $500 to invest.  Thanks in advance.

Member Summary
Staff Summary
Thanks for visiting FatWallet.com. Join for free to remove this ad.

rated:
Put into a bank account. $500 is not enough to invest.

rated:
No. You don't invest for short term

rated:
Consider whatever money you invest in the market gone for 5 years. IF you can live without it for 5 years, then invest it in the market. If you can't, Don't.

rated:
With the $500 dollars, if you can afford for to take a loss to maybe $400 or have a gain to $600 then put it into a mutual fund.

rated:
Is this a CAPTCHA?

rated:
Xnarg1 said:   Put into a bank account. $500 is not enough to invest.
  $500 is not too little to invest, but it doesn't make sense for just 1-2 years.

rated:
1-2 years is short term. I'd go with high yield savings or CDs if you don't mind locking the cash up till then. You're guaranteed positive returns but you'll be looking at a grand total of $15 profit over the full 2 years. And it's taxable! 

rated:
You could, but only at the risk of needing the money later and having to sell at a bad time. For instance, if this were 2006, selling after two years would have resulted in a substantial loss.

On the other hand, scale matters. Turning $500 into $250 is hardly a life-changing loss.

rated:
I do.  I keep very little savings - short or long term - in cash.  But it really depends on what that short term savings goal is and how it would be affected by market fluctuation.

Let's say you are planning to buy a car in two years, and you are saving $1,000/month towards that goal.  Most people would say that was a short term savings goal, and that you should just keep that money in a savings account.  At the end of two years, you'd have about $24,200 in the bank, and you could go buy your car.  Now if you had put that money in an ETF over the last couple of years, you might have closer to $26,000.  You could buy a little better car, or simply buy the same car but still have two grand in the bank.  The downside is if that investment tanked, you could just as easily end up with only $15k or less in the account at the end of two years.  Then you are stuck - you either postpone your car purchase, or you settle for less car than you set your sights on originally.

Personally, I'm accepting that risk with a pretty aggressive investment strategy at all times.  

rated:
Also, the fees for selling your stock or whatever you buy at the end of the 2 years is probably a large percentage of your initial $500.

rated:
dcwilbur said:    I keep very little savings - short or long term - in cash.  
  "very little savings" can mean vastly different things to differnt people

rated:
meade18 said:   Also, the fees for selling your stock or whatever you buy at the end of the 2 years is probably a large percentage of your initial $500.
 

  
There are enough commission-free, low-cost funds out there that this wouldn't have to be a problem. Vanguard, Schwab, and Fidelity all have fee-free accounts which charge no commissions to invest in their own low-cost funds and ETFs.

rated:
Your best bet is probably to use that $500 to open a bank account which gives you a $150 or $200 promo. Instant 30-40% gain and FDIC insured.

rated:
I do something similar to dcwilbur because sometimes when you are in a relationship, available money starts to become spent money. Putting money in stocks makes it just a little bit more difficult to get out. And in this relationship, I am not exempt from failings to leave money alone. However, if I put money in a stock, it tends to stay there. I have only ever sold one holding that I had in a plain brokerage account... so my strategy is working pretty well... however, I have never used it to buy something because I just always tell myself to try not to pull the money out. So, it tends to be free cash that hasn't yet been invested through regular paychecks that goes towards those things (money that I could put into an investment after paying bills and stuff).

rated:
Yes! Much better psychologically for savings if you pretend that $$$ isn't liquid, when it really is. To that end, Brokers with easy margin lending linked to a debit card or checkwriting are a fail.

rated:
Yes, similarly to making an investment in playing blackjack in Las Vegas.

  • Quick Reply:  Have something quick to contribute? Just reply below and you're done! hide Quick Reply
     
    Click here for full-featured reply.


Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017