How Are You Investing for Shorter-Term Goals

There are any number of reasons why people invest in the market, but two of the most common are retirement and paying for a child's college education. In fact, according to the Investment Company Institute, 94% of mutual fund investors say they invest to save for retirement, while 24% say they do so for education. But as important as those life goals are, they are not the only reasons people invest. Some do it to bolster their emergency savings or have more material goals in mind. And some do it just because they enjoy the challenge.

We recently asked Morningstar.com users to name some of the non-retirement-, non-college-related goals they are investing toward and how they plan to get there. The responses were quite varied, but the goals generally fell into three categories: cars, houses, and helping family. To read the full discussion, click here.

Oh Lord, Won't You Buy Me a Mercedes-Benz
Dawgie wants a new car but admitted that the market might dictate when to pull the trigger. "My car money is invested way too aggressively," Dawgie writes, "but I find it hard investing in bonds right now with yields so low. If the stock markets take another hit, I'll just put off buying a new car."

Danahan also is eyeing a new ride, saying, "My 12-year-old Nissan Pathfinder wants to turn into an Acura MDX." This reader's investment strategy: "In times like this, I get more aggressive with my individual stock account, especially after a market pullback. This week I doubled my stake in Apple (AAPL), increased Qualcomm (QCOM), and bought undervalued DuPont , Caterpillar (CAT) and
Cummins (CMI). Hoping for a post-election rebound and a Santa Claus rally."

Sirschnitz has taken an interesting approach to buying a new car, deciding to finance the purchase and invest the money that could've been used to pay with cash. "We invested $35,000, the amount to be financed, in three cumulative REIT preferred stocks that were just then being offered," Sirschnitz says. "The REIT preferreds were each yielding 6.6% and not callable for five years. An unexpected benefit of our strategy is that since we bought the preferreds, they have appreciated about 6%, which is the equivalent of approximately three loan payments. So, at this time, we have a little cushion built in."

Our House, in the Middle of Our Street
Several readers mentioned parking money in a safe, short-term investment while planning home upgrades. JHAsheville, for example, is putting extra income into a tax-exempt money market account and bonds in the hope of making over the laundry room and buying new furniture and carpeting.

Nittwitt plans to take advantage of the low-interest-rate environment by investing in a second home in a warmer climate, stating, "I plan on taking a cue from Odysseus. Grab my snow shovel, hold it in front of my forehead, and begin walking south. When someone asks what it is that I am carrying, I know I have traveled far enough.

Another poster, gyer12, reported speculating in stocks while taking out a loan on a second home, hoping to make more than enough on the investment to cover the cost of the loan. Two years later, it hasn't paid off. "This has produced a slightly negative return," gyer12 says. "I'm going to give this effort another six months."

Aside from buying homes, many readers spoke about investing in order to upgrade the ones they already own or the contents within; new furniture and appliances appeared on many wishlists.

It's a Family Affair
Being prepared for anything was on the minds of some readers, including FidlStix, who wrote, "As I pull down the flaps and nose down into a retirement glide path, I've decided to rob Aaron and pay Zory to augment my two-year cash/short-term bond bucket with additional bonds for a third year. This extra cushion will be available for family contingencies--the washing machine and dryer die or a car engine blows up. This buffer will also provide additional cash to 'rebalance' into equities in the event of an (almost inevitable) market plunge in the near term."

Dragonpat mentioned investing in real estate, with her family's well-being in mind. "I would like to generate enough money in my taxable portfolio to save two down payments for a house or condo. I would like to buy the house/condo and then rent it back to my children at market rates. I could leave the property to them in my will. They could live there with my future grandchildren."

In fact, family was on the minds of many posters this week. Several mentioned helping their adult children with housing, cars, or weddings.

"With retirement a couple of years away, and my funding pretty well set, I'm planning on giving my kids one last assist" wrote Grandmarais, who plans to help her children buy cars, real estate, or just get a good financial foothold after college. She says she had been using certificates of deposit at a credit union for short-term savings, but due to low interest rates, she has switched to  T. Rowe Price Capital Appreciation (PRWCX) fund.

Then there was Darwinian, who questioned the very basis of this week's question. "Non-retirement, non-college expenses?" he wrote. "Is there anything left?"