Consider liquidity in your investment choices
Liquidity refers to how quickly you can convert an investment into cash without loss of principal. Generally speaking, the sooner you'll need your money, the wiser it is to keep it in investments with comparatively less volatile price movements. You want to avoid a situation, for example, where you need to write a tuition check next Tuesday, but the money is tied up in a long-term mutual fund whose price is currently experiencing a loss.
Therefore, your liquidity needs should affect your investment choices. If you'll need the money within the next one to three years, you may want to invest in short-term bonds, certificates of deposit, a money market account, or a savings account. Your rate of return will likely be lower than that possible with more volatile investments such as stocks, but you'll breathe easier knowing that the principal you invested is relatively safe and quickly available, without concern over market conditions on a given day.
410 k and IRA info
