Short-term Investments Offer Liquidity – and More

Generally speaking, investing is a long-term process. You invest in your IRA and 401(k) to reach a long-term goal – retirement. You may invest in a 529 education savings plan for many years to reach another long-term goal – college for your children. But is there also a place in your portfolio for shorter-term investments?

In a word, yes. You have three good reasons for owning short-term investments: liquidity, diversification and protection of longer-term investments. Let’s look at all three:

Liquidity

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