Picking from a lunch menu will often give you the option to choose two items from a group. You might pick soup and a sandwich or a salad and a sandwich, but you just can’t select everything off the menu. That’s very similar to the investment world when you’re choosing between safety, growth, and liquidity. Designing an investment plan requires you to pick the two that you want to achieve so let’s talk about which investments help you achieve each of these.

Heather Atkins, CFP® joins the podcast to help us sort through the menu of options. Since you won’t find an investment that has all three of these things wrapped up into one, you typically have to pick two and the tradeoff is you don’t get the third. We want to formulate a plan to make sure we get a little of all three through a properly structured portfolio.

The options might not be the same for everyone but there are common ways to achieve these different combinations. Let’s begin with growth and safety, which means you have to sacrifice liquidity. An example here would be something like a CD, which a lot of people have been using recently with the rising interest rate environment. You can get a guaranteed return over certain time periods, but you won’t have access to that money right away if you need it. A fixed annuity is another common example of ways people achieve this as well. As you can probably tell, people are often looking for these particular investments when they’re getting close to retirement and want to remove risk from their money.

Now, when you’re looking for growth but want to maintain liquidity, that means you’ll have to give up safety. This is where you’ll look to the stock market and even the bond market right now. You know going in that this will carry more risk and you might see your account value go down, but this allows you to pull your money out at any time. If someone doesn’t have an emergency fund set up, it’s best to hold off on this option because you want that safe bucket first. From there, you can set up your portfolio in a way that achieves growth to keep up with inflation and the interest rate environment.

The final pick two combination is safety and liquidity. This typically comes in the form of a savings account of some sort, but many people don’t realize they have a safe option inside their retirement plan. There’s usually a stable market fund or a money market that’s available in the 401k, which won’t be a moneymaker but it can provide that peace of mind.

You want to make sure your portfolio has a nice mix of all three of these things, and a financial professional can help you get your hands around this and assure you have the right diversification.

Here’s some of what we discuss in this episode:

• Examples of investments that get you safety and growth and why you might use them.

• The stock market is going to give you growth and liquidity at the expense of safety.

• How can you achieve safety and liquidity?