When it comes to financial planning, it would serve you well to have a balanced approach that includes medium-term investments. Typically spanning between 3 and 10 years, middle-term investments often provide a middle ground between short-term savings and long-term commitments and a balance between risk and potential returns. They also usually involve less volatility compared to short-term investments on top of potentially higher returns. All in all, middle-term investments are quite suitable for investors with a moderate risk tolerance and a diverse range of financial goals.
While investors can take advantage of middle-term investments in many different ways, they can be particularly useful for achieving goals such as saving for a down payment on a home, building a retirement fund, or simply expanding an investment portfolio in order to diversify it.
Today, there’s a wide variety of medium-term investment options that may align with your financial goals and current levels of risk tolerance. From traditional savings accounts to alternative assets like cryptocurrencies,
Here are some different medium-term investment options worth considering this 2024:
1. Cryptocurrency Investments
Cryptocurrencies have gained a lot of popularity as alternative investment options in recent decades. While they offer the potential for high returns, it’s worth noting that cryptocurrencies are highly volatile and speculative. That makes this type of investment a good match for risk-tolerant investors who are seeking exposure to a high-growth and innovative asset class.
If you want to include cryptocurrency in your financial goals, be sure to educate yourself about the different types of coins and the technologies that come with them. Find a reputable cryptocurrency exchange before you start buying, and if you’re interested in coins with specific qualities—for example privacy tokens like Monero (XMR), look for a dedicated Monero wallet to keep it in. These efforts will reduce your vulnerability to hacks, theft, and other threats that are associated with keeping cryptocurrencies on exchanges or online wallets.
Also look for a wallet that lets you have full control over your private keys. This will allow you to manage and access your holdings independently.
2. Certificates of Deposit
Certificates of Deposit (CDs) are time deposit accounts offered by banks and credit unions. They’re known as low-risk savings options with fixed interest rates and terms ranging from a few months to several years. CDs offer higher interest rates than common savings accounts, but they also require you to lock in your money for a certain term. This will be perfect for you if you’re the type of investor who wants a predictable return with minimal risk.
In terms of risks, however, there are still a few associated with CDs, particularly early withdrawal penalties and opportunity costs. If you need to access your money before the CD matures, you may incur penalties for early withdrawal, and you may also miss out on higher returns if interest rates rise.
3. Equity Mutual Funds
For investors who are looking for exposure to the stock market without the risk and effort of picking individual stocks, equity mutual funds are worth considering. They entail investors pooling their money towards a diversified portfolio of stocks, usually across sectors and regions, to reduce the impact of any single stock’s performance on the overall portfolio. Equity mutual funds are managed by professionals, which makes them a convenient option for investors who lack the time or expertise to manage individual stocks.
Keep in mind that the main risks associated with equity mutual funds are market risk, management risk, and fees. If the market or a specific sector of it underperforms, the fund’s returns may suffer. Management fees can also eat into your returns over time.
4. Real Estate Investment Trusts
Another medium-term investment you can consider is real estate investment trusts (REITs). This type of investment vehicle will allow you to invest in real estate without buying physical property. Instead, you’ll invest funds in companies that own and manage income-producing properties. Then, the trusts are distributed as rental income to shareholders. It affords you a hassle-free way to gain exposure to the real estate market without the stresses and costs of managing your own property.
REITs are also a popular choice for income-oriented investors, given that they offer high dividend yields and potential capital appreciation. However, like any other investment, it can’t be considered risk-free. Market risk, interest rate risk, and management risk are the main risks associated with REITs. If the real estate market or interest rates decline, or if the REIT’s management underperforms, it can affect the fund’s returns and dividend payouts.
5. Term Life Insurance
Lastly, if you want to consider life insurance as a form of medium-term investment, opt for term life insurance. It provides coverage for a specific period, offering financial protection to your loved ones in case of your untimely death. What sets it apart from whole life insurance is the premiums are typically lower in term life insurance, which makes it an affordable option for medium-term financial planning.
The main risk of term life insurance is the expiry of the coverage. If you outlive the policy term, you won’t receive any benefit unless you renew or convert the policy, which may come with higher premiums.
There are lots of other medium-term investment options that can suit your needs, and this list is by no means a definitive one for all the types you can explore. But whichever you choose, keep an open mind and get the full details on your chosen option, especially the associated risks and rewards. Your financial objectives for 2024 and beyond are yours entirely to decide, and what’s important is that you settle not for a medium-term option that’s merely popular, but that actually serves your interests and life circumstances.
