If you’re old enough to be reading this article, then you probably have a little concern when it comes to your future–especially your financial future–and how you’ll get by during retirement, because no one’s quite sure about the state of Social Security in the coming decades.
And with fewer companies offering pension plans to retirees, your financial well-being rests heavily in your hands.
With such great responsibility comes even larger decisions like how much money will you need and what you should invest in.
Many retirement planners suggest having at least 20 times your annual income in your portfolio so that if you take 8 percent of that each year, you should be able to live off of the amount indefinitely. Of course there are many variables at play, but to err on the side of caution, more is always better. Adding 15 percent of your income to your portfolio each month should put you in a good position for retirement.
As for which investments you should make, remember that portfolio diversification is key. Mutual funds are a safe bet for investing, because they ride out the financial storms well. However, they don’t allow for dramatic ups–and downs–like individual stocks or commodities like precious metals. Here are the best places to put your money:
Mutual Funds and Index Funds
Both mutual and index funds are safe bets since they are made up of shares from many large and small companies, thus reducing the amount of risk that your portfolio takes on. You can have a little piece of thousands of companies, both domestically and worldwide. These are best held on to for at least five years, preferably forever, since they usually have great track records over long periods of time.
Gold is by far the most common metal to invest in, because in all of recorded history, it has always had some value says Bullion Vault’s Adrian Ash. Over the last two years, gold prices have risen steadily but are at somewhat of a standstill right now. This has been the case for nearly a year, says the Investor’s Chronicle, but financial experts have a hunch that the U.S. and England are planning another round of stimulus packages, which could make gold prices shoot up again. One simple way to easily and safely add gold to your portfolio is to research for a reputable source to buy from, such as US Money Reserve, that offers good customer service.
Stocks allow for high returns, but equally large losses. If you have a keen sense of business and can get in on stock from up-and-coming companies when the stock price is low, you can become wealthy. Like mutual funds, stocks are best held on to for the long haul, but they are easy to sell if you need to liquidate or when you need to re-balance your portfolio.
Bonds offer stability to your portfolio, and while the profits aren’t huge, bonds can provide you with consistent income, which you can then reinvest into your portfolio. They also provide another level of diversity, which is so important in the world of financial planning. Additionally, the income that you receive from some bonds are exempt from federal taxes.
It’s important to remember to keep a healthy balance of each type of investment in your portfolio. Remember the adage that says you shouldn’t keep all of your eggs in one basket? Fin24 financial advisor Heather Robertson says that diversification is so important because when an investment isn’t doing well, the others can pick up the slack.
It’s impossible to predict the future, but if you have a dozen baskets of eggs, you can feel good about your financial future.