Stock investors hear it all the time when stocks move. adviceStay the Course

And in other words: don’t sellDo not let your gut instinct dictate what you should do. Stick to your financial plan. For long-term investors, this advice is generally a good idea. The stock market is likely to recover losses when owners have the funds for a long time, or even decades.

However, the calculation is very different for those who depend on stock to fund their near-term purchases. This could include purchasing a house or financing a college education for your child in the next 12-18 months.

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Firstly, this strategy is often unwise — it’s like gambling with money you can’t afford to put at risk. According to financial advisors, this strategy is one that many investors weigh as stocks continue to soar.

However, the risk was highlighted in 2022. It is the Dow Jones Industrial AverageAnd S&P 500Stock indices are falling off their previous highs worst monthSince March 2020, when the pandemic began. The S&P 500 is down about 13% this year.

Ted Jenkin (certified financial planner, cofounder of oXYGen Financial Atlanta) stated: “This is the initial lesson for most investors. Money you need in short-term objectives just doesn’t belong inside the stock exchange.”

According to financial advisors, money that is earmarked for large purchases within months should be invested in something more conservative. This protects it from market whiplash.

We always ask, “Are you okay if $100,000 becomes $60,000 at the exact time that you have to write that?” [tuition] check?'” Lee Baker CFP is the founder of Apex Financial Services Atlanta. “The answer to all questions is always “no.”

Investors caught unaware by 2022’s market plunge don’t have many options.  

You can bet stocks could rebound when you really need them.

The war in Ukraine, and the Federal Reserve’s renewed cycle for raising interest rates, are not the only issues. may prolong the recent pain — or make it worse.  

It is better to take the cash from stocks you don’t need, and put it into something safe, even though it may mean taking on a loss.

“You took that decision [to invest in stocks]Baker agreed. Baker said, “You have to suck it up.”

Baker offered one small consolation: tax-loss harvesting. Investors who hold stocks and stock funds within a tax-exempt brokerage account are subject to this rule. Investors can use an investment loss as a way to offset capital gains elsewhere in their portfolio.

Baker suggested that investors might also look into short-term loans to pay for college tuition. This could allow stocks to recover. But this also carries risk — namely, you’re still on the hook for the loan even if the market doesn’t recover as fast as anticipated.

The high inflation rate is eating intoThere are very few returns on certificates of deposit and bank accounts. Rising interest rates are a major problem for bond funds, which can lead to a fall in bond prices. The iShares Core U.S. Bond Benchmark is one example. Aggregate bond ETFAGGThe price of a similar product is 10% less than last year.

According to advisors, it is better to store cash than stock for short-term funds.

Some investors may be able get a higher return by investing in other ways.

One example of a risk-free asset is I bonds. paying a guaranteed 9.62%Through October 2022

But there are some caveats. There is a $10,000 limit on the purchase. The money can only be touched for one year. I bonds cannot be used by investors who require the funds within a short time period. Jenkin stated that investors who withdraw funds within the five-year period are subject to an interest penalty. However, Jenkin noted that even though this penalty is significant, they still receive a great return.

Jenkin suggests that short-term Treasury inflation-protected Securities be considered for investors. These securities offer protection against inflation and rise in interest rates. Jenkin recommends Vanguard Treasury Inflation Protected Fund. [VTIP](Or something similar.

He suggested that floating-rate bonds funds may be an option. These funds are more at risk than U.S. Treasury funds.

Jenkin explained that they are currently in one of the markets where short-term cash is very difficult to make a profit.