The difference in investment returns averages differ depending which vehicle of investment you choose to go with.If you take the average of each investment avenue over a 10 year span you will see a noticeable difference.Account savings, certificate of deposits and U.S. Treasury Bills have low returns and may average just below 4%.Long term Government Bonds over that same time span may bring in a little over 5%.Long term investment vehicles such as Company Stock may bring in returns in excess of 10%.The Stock option is riskier since they are not insured and have no guarantee of performance or assured life expectancy.
Many financial experts feel it is important to save at least a portion of your investment in higher risk options.before going out and finding the first investment guru out there you need to know that they do not agree on how much needs to go to what allocation.They do agree that the closer you get to retirement, less of your investments need to go to riskier investments.
If you approach a financial agency for investment advice they will try to sell you on putting all your assets into mutual funds or retirement accounts.If you approach a broker he/she will tell you to put minimal amounts into mutual funds and retirement accounts and go for stocks.Which investments you want to invest in, of course, is your decision.you need to select the vehicle that you feel most comfortable with.
You want to reduce your risk but not to the point that you will lose over inflation.The primary means of reducing risk is to diversity your investment.Diversifying your investment is simply dividing up your investments into different levels of risk.this does two things for you.you will not loose every thing if one of the investments totally fails. Secondly one or the other investment vehicle will always out perform the other.Essentially, diversifying into different investments will reduce risk and potentially improve return.
How do you diversify?Asset allocation must add up to 100%.this is where your brokers and financial planners may disagree on.Asset allocation is basically an opinion generated state of mind.Some may tell you to divide things up by 10%, 30%, and 60%.another may tell you to divide it 15%, 35%, 50%.there is no real magic number.The percentages will determine the risk level you are at based on what you are investing in.
One thing these planners do agree on is that the closer you get to retirement the less risk you should be taking. as you get older they will tell you to reduce your exposure to stocks and go for the more secure bonds and cash allocation.Age is not the only factor involved here.your financial status or circumstances may suggest a higher or lower risk factor.to see other writing leading up to this writing look for my blog URL in the resource section.
In summary:Save regularly. Make investing for retirement a habit.Diversify assets to prevent large losses. Shop around for investment advice, select a person you can work with and is available. keep your earnings as much as possible over inflation if not equal to.Finally not all financial experts will agree on the same avenue of investments.Select one that will provide the best return for you.
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