Brief descriptions of investment options for the
These days, you can’t retire without using the returns from your investments. You can’t count on your social
security checks to cover your expenses when you retire. It’s barely enough for people who are receiving it now to
have food, shelter and utilities. That doesn’t account for any health care you may need or in the even that you
need to take advantage of such funds much earlier in life. It is important to have your own financial plan.
There are many kinds of investments you can make that will make your life much easier down the road. Plan early
and out your money to work in the options that you understand and feel comfortable with.
|Diversity is an important factor when deciding upon the range of long-term
investments for your retirement
The Importance of Diversity
In the paragraphs below are brief descriptions for beginning investors to familiarize themselves with different
kinds of investment options. Although you should limit yourself to the investment options that you understand, it's
also important to diversify your investments. This spreads your risk and minimizes eventual losses, or "lean"
Keep also in mind the Pareto Principle, which applies to many things in life, including investing. It's basically
the 80-20 rule, where approximately 80% of the results come from the 20% of the sources. Or, to put it simply,
roughly 80% of your investments will provide about 20% of the returns, while the other 20% of your investments
will likely provide 80% of the returns.
The more you diversify your investments, the more likely is that you "hit" upon a few high performs that will
provide the bulk of your returns. All the while, the majority of others will trickle in, or even make losses. But
it's those few high earners that will provide for your financial security in the retirement years.
Different Types of Investment Options
Here are some of the investment options available today, worth considering for startup investor:
The easiest and most popular kind of investment is a 401K plan. This is due to the fact that most jobs offer
this savings program where the money can be automatically deducted from your payroll check and you never realize it
Life Insurance policies are another kind of investment that is fairly popular. It is a way to ensure income for
your family when you die. It allows you a sense of security and provides a valuable tax deduction.
Stocks are a unique kind of investment because they allow you to take partial ownership in a company. Because of
this, the returns are potentially bigger and they have a history of being a wise way to invest your money.
A bond is basically a promise note from the government or a private company. You agree to give them a set amount
of money as a loan and they keep it for a set number of years with a predetermined amount of interest. This is
typically a safe bet and one that is a good investment for a first time investor because there is little risk of
losing your money.
Mutual funds are a kind of investment that are based on the gains and losses of a shareholder. Basically one
person manages the money of several or many investors and invests in a list of various stocks to lessen the effect
of any losses that may occur.
Money Market Funds
A good short-term investment is a Money Market Fund. With this kind of investment you can earn interest as an
If you are interested in tax-deferred income, then annuities may be the right kind of investment for you. This
is an agreement between you and the insurer. It works to produce income for you and protect your earning
Brokered Certificates of Deposit (CDs)
CDs are a kind of investment where you deposit money for a set amount of time. The good thing about CDs is that
you can take the money out at any time without paying a penalty fee. We all know life isn’t predictable, so this is
a nice feature to have in your option.
Real Estate is a tangible kind of investment. It includes your
land and anything permanently attached to your piece of property. This may include your home, rental properties,
your company or empty pieces of land. Real estate is typically a smart and can make you a lot of money over