Choosing the Right Investment for Your Situation
Stocks: Risky With a Chance of Greater Wealth
If you are young, it makes sense to put a lot of your investment money in stocks. Stocks go up and down every day. That means you have no guarantees. A stock that earns a lot of money today could crash tomorrow, leaving you with nothing.
This volatility can devastate investors close to retirement. If you still have a few decades until you retire, though, you have a longer time to recover from market dips and crashes. Plus, stocks give you the best opportunity to generate big returns for your money. Over the long-term, this is your best option for making more money.
Paying attention to advice from investment professionals can help you avoid troublesome industries and focus on markets that will likely grow. Fisher Investments videos, for instance, will show you what areas of the world economy will likely grow in the upcoming year.
Money Market Accounts: Little Risk With Small Returns
If you are close to retirement, then money market accounts give you a good place to park your money with little risk. This investment option also gives you easy access to your money. In most cases, banks will let take money out of your account without penalties as long as you maintain your minimum balance. That’s useful for people who aren’t happy with the interest rates they get from savings accounts and have enough money that they can leave it alone for years at a time.
Unfortunately, money market accounts don’t usually keep up with inflation. If your account offers three percent interest and inflation grows at four percent per year, then you’re losing a little money every year.
Bonds: an Opportunity to Offset the Risk of Stocks
Bonds offer a middle road between money market accounts and stocks. They don’t have the earning potential of stocks, but they also don’t have as much risk as stocks. They usually earn more money than money market accounts, but they’re not quite as reliable and they don’t give you easy access to your money.
Many people use bonds to offset the riskiness of stocks. When you’re young, you should only put a small amount of money in bonds. As you get closer to retirement, you can shift a larger percentage of your investment money to bonds for more financial protection.
Opportunities in Real Estate
Many cities are still trying to recover from the housing crisis. That creates a good investment opportunity for those who have enough money to purchase real estate outright. Values are starting to climb, though, so the sooner you buy, the better your price will be.
This investment option works best for people who can afford to part with a $200,000 or more. Otherwise, buying property could hurt your lifestyle. You will likely make the money back over time, but that could take years.
What investment options have worked well for you?