David Morey 
Planning is extremely important in personal finance and investment to achieve any short-term or long-term financial objectives. While most people have savings goals in the long run towards retirement or buying a house, there are other opportunities that become available at short notice or other immediate needs.
This challenge can be approached best through a combination of long-term and one-time investment plans. Long-term and one-time investments serve two different purposes, yet they complement each other in case of proper strategy approach.
Understanding Long-Term vs. One-Time Investment Plans
Long-Term Investment Plans: Long term investment plan accumulate wealth gradually over years and sometimes several decades. These are often retirement funds, education savings, and other long-range financial goals. Generally, the hallmark of long-term investments is that you are committed to staying invested over a significant period to let compound interest and market growth work for you.
One-time investment plans: One-time investments, on the other hand, are lump sum investments towards specific goals or opportunities which are more time-sensitive. Examples include among other things purchasing a new car, funding school education of a child, or exploiting a market opportunity. One-time investments tend to be more focused on short-term or mid-term objectives and may demand closer follow up than long-term investments.
Why Combining Long-Term and One-Time Investments is Helpful
Both long-term and one-time investment strategies are defined by unique benefits, although they may complement one another when well-designed. Some of the significant benefits of combining long-term and one-time investment strategies are listed below.
- Long-term and one-time investment strategies help diversify a portfolio. The former tends to be stable and provide steady growth while the latter can capitalize on market opportunities or high-reward, high-risk assets.
- Long-term investment tends to have low risk since investment appreciates steadily with time while investments made one-time might be risky in a way that they might be possible to bring about the high returns in the short-term and medium-term. Balancing of both of them will have the risk and growth balanced.
- One time investment plan will allow you the flexibility of changing with regard to what is happening to you. For example, when you get a bonus, an inheritance, or some other form of surprise cash inflow, you could add it towards a one time investment. In the meanwhile, your long term investment steadily keeps on growing.
- Long-term investments are for future security as their objective is retirement and long-term accrual of wealth, and one-time investments take care of present goal kindling or present needs. Together, they create the scope for you to aggressively chase both a future sense of security and meeting the current goals.
Step-by-Step Integration of Long-term and One-Time Investment Plans
Now that we know the benefits of aligning a one-time and long-term investment plan let’s go through how to align them.
Step 1: Define Your Financial Goals
You need to clearly state your long-term and one-time investment goals. Ask yourself,
- What are my long-term goals? For example, retirement, education, or property purchase.
- What short-term goals do I have? One-time for example, getting a car, going on vacation, paying off debt
After determining the categories of your goals, plan how you will invest your money. For long-term goals, you want growth that is consistent for a period of time. For one-time goals, you need to determine a point in time and the best way to use the sum investment.
Step 2: Determine Your Risk Tolerance
To a certain extent, your risk tolerance will determine where you divide your investments between long-term and one-time plans. Long-term investments can offer more growth with less immediate risk because they utilize the benefits of compound interest over time but still fluctuate with the markets in the short run.
While one-time investments tend to carry a higher risk, they also tend to yield more return. Evaluating your tolerance for risk will therefore enable you to balance the two in an effective manner. The risk-averse will thus favor stable long-term investments while the risk-lover may opt for the available opportunities that are available in the market in one-time investments.
Step 3: Develop Budget and Investment Strategy
Then, present an accurate budget and investment plan. Determine how much you can put every year into long-term investments, with an understanding that the money must remain untouched for several years. This may include contributions to your retirement funds, IRAs, or regular savings plans invested into stocks or mutual funds.
Then think about the cash you may receive in the near future-annual bonus, tax return, inheritance etc. and how you want to deploy that cash-effectively whether it’s in the stock market, real estate, or something else.
Step 4: Divide Your Money between Long-term and One-time Investments
Once you have defined your goals and assessed your budget, then you need to decide how you will invest the dollars between long-term investments and one-time investments. In reality, there’s not such good formula for this and decisions here depend on you, but here’s a good place to start:
- Long-term investments. Long-term investments should be the bulk of your portfolio if you have longer time horizons. Take retirement saving that spans to 30 years, for example; you could be relatively aggressive with investments such as investing in stocks since it has a potential long-term growth but exposes you to volatility on a short time scale.
- Investments Any one-time investments should be placed in nearer goals or market opportunities. For example, if you have an expense that comes due in the near future, such as paying down on a house, you might want to invest conservatively, for example, in bonds, CDs, or in other low-risk products which will help preserve capital.
Step 5: Monitor and adjust your strategy
You must be regularly tracking your financial markets – and your goals – as both are dynamic. Be keeping tabs on your investments to ensure that they’re always in line with what you originally intended. Periodically review your plan for changes in your life circumstances, financial goals, or market conditions.
If you attain one of your short-term goals, you may reinvest those dollars into long-term investments to amass wealth for the future. Similarly, if you are nearing retirement, you may begin to incrementally transfer larger portions of your long-term portfolio to less-risky, income-generating investments to preserve capital.
Step 6: Engage a Financial Advisor
If you are ignorant of how to balance long-term and one-time investments, you can refer to a financial advisor for better guidance. He or she will be able to help you formulate some plan that is tailored to your risk tolerance, your goals in terms of finance, and time horizon.
Conclusion
One of the smart strategies of diversifying a well-rounded financial portfolio is through the combination of long-term and one-time investment plans. Defining what you want and what your risk tolerance is, you can take steps forward with a future as well as some immediate needs that you need to address. Whether it is short-term opportunities or actual investments for your retirement, a balanced way of investing will lead you to financial security and success in the future.
