Three years ago, we received $8,000. We earmarked that money for an international trip to see family. However, due to the pandemic, we knew we wouldn’t make the trip for several years, so we followed the advice of our financial planner and invested it in a Silicon Valley mutual fund. Unfortunately, this money has taught us the perils of short-term investments, especially in an unstable pandemic economy.
How the Mutual Fund Performed
We didn’t check the account balance for 18 months. The money was invested, and we knew we wouldn’t need it for some time, so we let it percolate and grow, or so we thought. About a year ago, as we started to plan the trip, we looked at the balance and were dismayed. Our $8,000 had dropped to $5,500!
We watched for several months, hoping for a recovery, but that did not happen. Our financial planner assured us that the mutual fund would turn around and grow this summer. The problem is that we need the money for a trip at the end of this summer, and we need to buy airline tickets several months in advance.
How the Mutual Fund Is Performing Now
True to his word, the financial advisor is correct; the mutual fund is slowly turning around. However, its recovery is so slow that we won’t have the money in time for our trip.
The mutual fund is currently at $6,675, so we’re still down $1,325 from our original investment.
Meanwhile, my husband and I had to book the tickets for our family to travel early in the fall. The tickets for our family of five were $8,400. We planned that the interest the mutual fund earned would cover the difference between the $8,000 we had been given and the additional $400 the tickets cost. That did not happen.
The Way We’re Handling This Financial Short Fall
Now, we have to be creative to cover the expense of the tickets until our money regains its value. We had to raid our emergency fund and use the rest of our tax refund to pay for the tickets. We hope our mutual fund will have gained its original value by August or September so we can move the money out of the account and back into our emergency fund. However, we are prepared to wait several more months for the mutual fund to continue to reverse in a positive direction, but eventually, we will need that money.
Lessons Learned
This was our first attempt at utilizing a short-term investment, which did not go as planned. Rather than making us extra money through interest in a safe investment, the mutual fund has caused us stress and anxiety.
In the future, if we want to put our money in a safe, short-term investment, we’ll likely choose a more conservative option like a certificate of deposit or a high-interest-rate savings account. Of course, no one could have predicted the pandemic or the economic turmoil it created, but we’ve learned to be more conservative because you never know what will happen.
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Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York where she loves the natural beauty of the area.