A peek into Kelly's short, mid & long term financial strategy 🤑
[Written December 12th, 2024]
Hi friends —
It's reflection-o-clock. And here at Womanhood, we love a good year in review… but even more so – we love taking action off of it 😛
So today, Kelly is sharing her personal short, mid & long term investing strategy after having the reflection that she has become known in her circles as a person to ask for investing advice this year.
This newsletter is for those of you who know you should be “doing something” with money that's “just sitting there” (and potentially for good reason!)… but don't have any real life examples of how other women are doing it. Read on, because in reading how Kelly is managing her money… you might find yourself inspired to take action you've been procrastinating for far too long.
Now, off to hear a bit from Kelly…
becoming your investie bestie
I recently did a reflection on what my top achievements of 2024 were. And while many key moments were on the list… my favorite one was that I've become “known” in my circle of friends, family & acquaintances as someone to ask for investing advice.
To bring this point home – over the last 2 weeks, I've been asked by 5 separate (and I'll add – very badass) women how I approach my investing strategy. Questions like:
“I have 2k to invest, what can I do with it?”
“I want to invest 50k I have sitting around, but I know I'll have some house repairs in the next few years – how do I financially plan for that?"
“What is the right course for me to learn financial planning & strategy – especially as an American expat?”
And while I don't have the ability to give any formal financial advice (though I'm studying for an exam that will give me that ability!), I do have the ability to share my approach to my personal finances. So today, that is what I'm going to lay out for you – quick and dirty. My personal approach (and of course, this is not investing advice).
Because more than anything, I believe that each of us more openly sharing our unique approach to life – inclusive of finances – is what creates a world where we feel more permission to be our true, unique selves 🧚🏼♂️
a short, medium & long term approach
Let's get straight to it. I think about my finances in 3 buckets:
Short term needs – money that will definitely be spent within 1 year
Medium term needs – money that likely will be used within 1-8 years
Long term needs – money that I don't believe will be touched for 8+ years
I handle each of these differently (which can feel complex)… but they each have quite a simple strategy.
My short term strategy is to have a high yield savings account. I put the money I know I'll need to pay self-employed or capital gains taxes (or general month to month expenses inclusive of travel) in an account that earns a 3-4% return, and leave it there. Job done!
My mid term strategy is to buy Treasury bills. For me, this is money that might be going into a house deposit, home renovation or education fund. I choose Treasury bills because it locks in a 5%-ish return (vs high yield savings accounts are variable and are not guaranteed to stay at 3-4%) and the date the Treasury bill “matures” can be selected which allows me to somewhat optimize my tax strategy (because all interest is a capital gain, and if I've already had a good income year and/or high capital gains year… I'd rather defer my additional gains to the following tax year).
I know I'm throwing around a bit of jargon, so a few things to add here to help you better understand them:
Treasury bills are an American money market instrument (there is likely an equivalent in every country, or bonds / certificates of deposit would be similar options to explore)
Treasury bills can be easily bought on your standard trading app, though they are a bit convoluted to understand at first glance (you buy the bills at a discount to their value, and then redeem their full value at maturity)
Treasury bills can be sold before their maturity date, and you earn the % of the gains that you're entitled to (the % of time of your original commitment that you've held the bill for – so it's low risk to commit to a time period of say 9 months)
My long term strategy is all about securities (stocks, funds, angel investments, etc). If I don't think I'm going to have my money in the market (or in a company) for at least 8 years, I personally feel that investing it into any of these instruments is (too high of a) risk.
A quick sidebar on this point: you often hear about the idea of “guaranteed returns”… but this “guarantee” is in the long term. With an 8 year timeline time horizon, returns are large in part thought of as guaranteed as any recession (or depression) would tend to recover with such a long period. Any less, and I feel that I am gambling… and I'm not a gambling woman!
The risk I am happy to take is within the investments themselves. I personally invest a lot more in individual stocks or thinly traded ETFs than what the traditional financial advisor might suggest. I invest largely based on personal interest & intuition (with a bit of technical prowess to validate any individual stock purchase timing), and over the past eight years it has proven me well.
Once I have money in the market, I actively monitor the individual stocks (quarterly) by keeping a pulse on earnings reports or through general industry movements. This allows me to get a read on if my investments continue to have upside in the medium to long term. Again, this sense is mostly founded in intuition (with a splash of technical validation).
Most times after reviewing my portfolio… I do nothing (hence the popularity of the "buy and hold" phrase you hear so often!). This is especially true for my personal short + mid + long term strategy, as I shouldn't need to liquidate anything I invest (seeing I'm keeping funds for big purchases set aside).
Will my intuitive-with-a-splash-of-technical-prowess strategy and success continue? Only time will tell… but again, this is my strategy – not yours. You should formulate a strategy based on your goals, liquidity needs & risk tolerance.
And as a final gift to you, my current holdings in each of the strategies are:
~$100k in short term aka high yield savings accounts (a big tax bill coming due at the end of the year!)
~$100k in mid term aka money market instruments (a home is in our 8 year horizon)
~$1.15M in long term aka securities
I hope this helps you with your investing strategy, and as always – my inbox is open for those with questions or thoughts they'd like to share 🧚🏼♂️