Investing Young: Managing an Acceptable Level of Risk in Your Portfolio
The following is a guest post…
It’s always a good idea to invest early to allow time to build up your savings, but there are other benefits to creating a diversified portfolio at an earlier age. Thirty percent of workers ranging from ages 55 and older have less than ten thousand dollars saved up for their retirement, according to an article by Liz Pulliam Weston on MSN.com. The numbers are across cultural backgrounds, and many people simply haven’t saved at all or started later than recommended. If you’re wondering when you should start investing, the answer is as soon as possible. Investing young allows wiggle room to make investments with an acceptable level of risk.
Obviously, starting at a young age will give you a longer period of time to save toward retirement. If you work for a company that offers a 401k program, you should consider taking this option. Most companies will match up to six percent of your applied withholdings. IRA’s are also a safe bet. Roth IRA’s are even better, since you pay all of the taxes on the initial investment. This means all withdrawals in the future will be tax-free, which includes any gains from interest that your account has accrued over the years. There are other mutual funds that are low-risk ways to invest, but if you are young, you can allocate a portion of money you can risk losing for more speculative investments.
If you want to play around with the market, you first need to establish what level of risk is acceptable to you. Investments, such as 401k’s and IRA’s, are great for long-term investing, if you are willing to allow them several years to offer a return. If you have extra funds and want to dabble with returns at a quicker rate, research investing in the real estate market. There are still many foreclosures wracking the market after the housing crash, but there are certain areas of the market that are growing. Military towns are one of the fastest real estate markets in the country. Veterans retuning from the Afghanistan and Iraq are in need of housing, and the government and banks are offering exclusive housing programs and loan opportunities to veterans and other service members, which is fueling a mini real estate boom.
Penny stocks are another way to invest with potential returns. These are speculative investments and bought with the intention of selling them quickly. Although some may find the risk acceptable because these stocks can be purchased, traded, and sold on the stock market for less than five dollars, you should still discuss the option with a broker, due to the speculative nature of the stock. Investment professionals, like TimothySykes.com, can offer their expert advice towards the goal of maximizing your investment capital.
Regardless of your age, any person investing for their future should have as diverse portfolio to cover all manners of risk and investing time periods – the long-term investments being your IRA’s and 401k’s and the short-term investments being penny stocks and others. Taking an acceptable level of risk can be helpful attitude towards turning a quick profit, and those gains can then be funneled towards your more substantial investments. Not everyone has money that they can play around with, and only you can decide what level of risk is acceptable.