facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Military Finances 101: Where to Park Short-Term Money Thumbnail

Military Finances 101: Where to Park Short-Term Money

Managing Your Finances

I've talked about emergency funds before and how the investments inside the emergency fund have to be very liquid. I often get questions about what to do with funds that someone has set aside for something in the next few years. Normally, the question involves getting good returns and therein lies the problem.

There are those out there that will disagree with this, but in my opinion markets are entirely unpredictable in the short term. Ask me where the stock market will be in 10 - 20 years and I'm pretty confident in saying that it will be higher than it is now. Ask me where it will be in 6 months and I have no idea. I also have no idea where it will be in 3 years. Somewhere between 3 and 5 years into the future I start to get some confidence that the market will be higher than it is today.

Here are some numbers to back that up.

  • Going back to 1872, the S&P 500  (or equivalent) 1 year returns have been negative 31% of the time
  • In the same time period when looking at 5-year rolling averages the average was down 26 out of 146 5 year periods or about 18% of the time
  • Push it out to 10 years and the index was down about 7.5% of the time
  • And, wait for it, if you go out to 20 years, the index was never down in value at the end of the 20-year period

So, what does that mean for your short-term money? Keep it out of the stock market. It probably means, a savings account, CDs or maybe a money market. If you're really adamant about getting a higher return, you could consider an ultra-short bond fund. Bottom line? No risk. Sorry...


If you found this article useful, you might like the following blog posts:

Military Finances 101: Should I Use My Roth IRA as an Emergency Fund?


Military Finances 101: Titling your Home


Military Finances 101: Tax Free Leave




Disclaimer
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.