Investing for the short, medium and long term

A keen interest in investing is an asset in achieving your financial goals, but successful investors are not made in a day. Investing your money wisely over a balanced mix of short-, medium- and long-term investments that match your goals will go a long way towards helping you achieve success.

It takes some patience to learn the ins and outs of investing over the short, medium and long term, but it’s worth the effort. Otherwise, there are so many options to choose from that you may put your savings into an investment that seems like a good deal, but which doesn’t really suit your investment goals.

How to invest

You invest for different reasons, and the type of investment you make should be guided by the reason for it. Are you saving for a honeymoon abroad, your retirement, or a rainy-day fund? The time horizon is a crucial factor – when will you need to access this investment? Before anything else, categorise your goals based on a time frame.

Short-term investments

Short-term investments have a time frame of up to 2 years. You could be saving up for a holiday, a car, or an emergency fund. Your priority is to save enough to meet your financial goal within the timespan.


The key factors to consider are your age, income, time frames and personal financial goals


Short-term investments have less time to grow through compound interest. You should save for the short term in a risk-free account that you can access easily. You will need a low-risk plan – a savings account that earns interest, a notice deposit or a money market account are safe alternatives. For a 2-year goal, how much you accumulate is more important than your interest.

Medium-term investments

Medium-term investments have a time horizon of 3 to 5 years, for goals a little further away. They can be quite diverse, depending on your needs and interests – education plans for children, weddings, or funding a business start-up are among the most common reasons for medium-term investments.

Over this longer term, you can take a little risk and afford some market volatility, unlike short-term investments. You shouldn’t stray into high-risk ventures, however, as you will have minimal time for adjustment to recover from a loss. Risk-averse options like fixed deposits can also be useful medium-term investments

A medium-term investment portfolio would typically have a relatively small exposure to shares, which are volatile over shorter time periods (typically less than 40% exposure) and the balance in interest-earning investments. There are funds available to invest in that have this type of mix of assets, typically called low-equity funds.

Long-term investments

Long-term investments have time horizons longer than 5 years. Depending on your goal, the timeline can extend as far as 30 to 50 years – your retirement plan, for example.

Long-term investment instruments include stocks, real estate and bonds. These investments influence wealth creation in the long run, but they can come with a higher level of risk over the short term.

Long-term investments enable you to allocate your funds according to your preferred strategy, for example:

  • current-income strategy,
  • capital growth strategy, or
  • balanced investment strategy.

You need to keep close tabs on your long-term investments. Market swings can affect your savings negatively over the short term. It’s important not to panic in such times and remember that you are a long-term investor, so you should have time to ride out these ups and downs. Be sure to create room for adjustments, as your goals and plans may change over time and making the necessary course corrections will ensure that your plan remains sustainable.

Which investment is right for you?

Your priorities and life goals should guide your investment decisions. The key factors to consider are your age, income, time frames and personal financial goals.

A standard investment plan that sounds basic for everyone is a retirement plan. Why? Because retirement is expensive, and it is vital that you prepare sufficiently for it. Proper investment plans can help you to avoid financial frustrations and enjoy your retirement.


Your stock returns depend on a company’s success


Early investment in retirement sets you up for long-term success. Starting to save for it in your early 20s gives you a longer period to invest and benefit from the accumulation of higher compound interest and returns – you could be surprised by how much more you will have at retirement if you start early.

Although retirement is universal, other investments are influenced by personal interests. Choosing the right investment can be daunting. But you always have the option to seek counsel from financial advisers, friends and family. The final decision, however, is yours to make.

When determining the ideal investment for you, consider the following factors

Level of investment risk and potential returns

As a beginner, you need to take calculated risks. High-risk investments are associated with expected high-level returns, but these should not be taken without proper research.

You can determine the risk-to-return ratio by dividing the amount you stand to lose by potential returns.

The higher the ratio, the higher the risk, and vice-versa.

Investment capital

Your capital determines how much you can stretch in investment. It doesn’t mean you can’t invest if you have a narrow budget. The idea is to choose an investment plan that suits your budget.

In some investments, you can consider alternative funding, like loans. Depending on your income, you choose a repayment plan that is within your budget.

At the end of the day, you want an investment plan that you can sustain easily.

Time horizon

Are you looking for a long-term or short-term investment? The term length determines which investment strategy to pursue. Your investment time horizon will determine how much risk and capital you put in. Other important factors to consider are liquidity, inflation rate, tax implications and volatility. If you’re struggling to select a perfect investment plan, Nedbank can ease the burden by offering expert opinions that help you make sound investment decisions.

Investment strategies to consider

Weigh the diverse options carefully – you need to understand the financial risk that comes with each investment strategy.

Here are some of the alternatives to consider


You invest in stocks to become one of the owners of a company. Your stock returns depend on a company’s success. It’s ideal to invest in shares that increase in value as a company grows, but this isn’t always easy to predict. Down the road, you can sell the shares and make a profit – although they are subject to appreciation and depreciation. This implies that there are some inherent risks due to market volatility.

With stocks, you can generate returns in 2 ways – by selling the shares later when they’ve increased in value to offer significant returns, and by earning money in dividends.


A bond is a loan an investor offers companies or government agencies. Interest rates determine the return on bonds. You have a variety of bonds to explore – treasuries, agency bonds, municipal bonds and corporate bonds.


You don’t have to be an investment expert to begin


Bond prices can rise and fall, gaining or losing value, although bonds are considered less risky than stocks when held to maturity. However, note that your investment may also lose money if you sell a bond before maturity.

Unit trusts or mutual funds

A unit trust or mutual fund pools funds from multiple investors to buy assets like bonds, stocks, or other financial instruments. This investment pool is managed by professionals who determine how and where to invest the fund’s capital. If you are considering a unit trust, you should first evaluate the fund’s minimum disclosure document, which provides its key features and costs as well as the history – although you must also remember that how a fund performed in the past does not determine how it will perform in the future.

The benefit of a unit trust is that it typically gives investors access to investments that would not ordinarily or easily be available to them as an individual and depending on the fund, it can provide a higher level of diversification than when investing directly in shares and bonds.

Cash equivalents

Cash equivalents (CE) are suitable for short-term investments, with a maturation date of under 90 days. Common CE investments include money markets, corporate commercial papers, and bank certificates of deposit. This investment option has high liquidity, which means you can access your money quickly.

The underlying asset in CE is cash, which does not fluctuate in value. For companies, cash equivalents are indicators of financial health.


Real estate or property is an ideal option if you are looking for a long-term investment that grows gradually. You can invest through rental properties or mutual funds.

There are many more types of investments to explore. Bank products, exchange trading, security futures, insurance, annuities and commodity futures also offer you an opportunity to earn returns.

Invest today to build financial wealth

The best time to invest is right now. Don’t wait until you make more money.

We all have short-, medium- and long-term goals that need financing. Achieving these goals depends on how well you invest in them. You’re at a higher risk of financial instability if you don’t invest as early as possible. Long-term investments, like retirement, are a necessity.

You don’t have to be an investment expert to begin. You can partner with professional financial planners to nurture your investment journey. Change your future for the best with sound investments. Connect with us for professional investment planning services and advice.