How to Invest for the Intermediate Term
Intermediate term refers to the financial goals you plan to reach in two to five years through your investing. For example, if you want to accumulate funds to put money down for investment in real estate four years from now, some growth-oriented investments may be suitable.
Although some stocks may be appropriate for a two- or three-year period, not all stocks are good intermediate-term investments. Some stocks are fairly stable and hold their value well, such as the stock of large or established dividend-paying companies. Other stocks have prices that jump all over the place, such as those of untested companies that haven’t been in existence long enough to develop a consistent track record.
If you plan to invest in the stock market to meet intermediate-term goals, consider large, established companies or dividend-paying companies in industries that provide the necessities of life (like the food and beverage industry, or electric utilities). In today’s economic environment, stocks attached to companies that serve basic human needs should have a major presence in most stock portfolios. They’re especially well-suited for intermediate investment goals.
Just because a particular stock is labeled as being appropriate for the intermediate term doesn’t mean you should get rid of it by the stroke of midnight five years from now. After all, if the company is doing well and going strong, you can continue holding the stock indefinitely. The more time you give a well-positioned, profitable company’s stock to grow, the better you’ll do.