The standard financial advice is to invest for your future and reserve some savings for an emergency fund. However, it’s also a good idea to keep some money free in case a great investment opportunity comes around. What if the price of a piece of real estate you were eyeing just dropped 40% in its price? What if a quality stock was trading low? Needless to say, these are opportunities you wouldn’t want to miss out on, yet all your money is tied up in complex investments with big withdrawal penalties. Uh-oh.
Investing is not a one-time buy. Opportunities will come and go over your lifetime. It’s why millions make their living trading in the stock markets because there’s an ever-present probability of profit. You have to keep your eyes peeled. Beyond that, you need to have a reserve of cash for that investment when the time comes. The money should be kept in an accessible savings account.
Think about the investments on your wish-list for the next five years. Wanting to invest in a piece of land, a business, or stock? You need to assess what amount of funding you would need to complete the transaction should the opportunity arise. Then, take that money and set it aside in an accessible account that generates decent interest.
*Image courtesy of John Lund.
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