Which kind of retirement investment is right for you? Some say that mutual funds are all the diversity you need. Others claim that a diverse portfolio is not complete without a stock of precious metals.
Who is right? Or, is there even one right answer for everyone? How can you cut through all the confusion?
To determine which retirement investment products will help you meet your retirement financial goals, you need to first lay out your goals. Where do you think you will be living after retirement? At what age do you want to retire? How big does your nest egg need to be by the time you retire?
Once you have an idea of your ideal retirement, you are ready to more clearly sort through the jungle of investing opportunities. What follows is a list of the most common ways people invest for retirement.
1. Precious metals.
Anyone who makes money in precious metals is either lucky, or can read the economy really well. The best time to buy silver and gold is right before the economy has a serious downturn, because the value of precious metals become inflated during economic downturns. Then, sell the metals before the economy recovers.
But unless you are well-versed in economic indicators, you will probably never make more than a 2% return investing in precious metals.
2. Universal life insurance policies.
This kind of life insurance is completely tax-free all the way around, making it a tempting retirement investment. Ideally, when the face value of the policy reaches a certain level, you can begin borrowing a certain percentage of this money tax-free, and never have to pay it back.
This only works if you have enough money to overfund the policy. Much of what you put into it goes to fees and commission. Also, most of these types of products have a lousy rate of return, with the best products returning only about half of what a good mutual fund can return.
3. Real Estate.
Despite what the late-night Real Estate gurus say, investing in Real Estate is risky business for the average person and usually leads to more loss than gain. That being said, if you can learn how to find a bargain and how to save up to pay cash for investment Real estate, it might not be a bad idea to include Real Estate as part of your retirement investment portfolio.
Annuities provide income from capital investments, paid in a series of regular payments. They guarantee constant growth, but the rate of return is low, and gets smaller when the Fed lowers interest rates.
Your best bet with annuities is to utilize them after you retire, as they are a much more conservative product and their value will not fluctuate with the stock market, as do mutual funds.
5. Individual stocks and bonds.
The rate of return on government bonds is lousy. Other than that, if investing in individual stocks and bonds appeals to you, make them a very small percentage of your portfolio. Choose those which have a long track record of upward growth, however gradual.
6. Mutual funds.
Mutual funds are funds containing a variety of stocks and bonds and other market investment vehicles. They are managed by a team of finance and market experts, so that all you have to do is deposit money into the fund and leave it be (or move it, if you find a fund that is performing better).
Mutual funds are by definition highly diversified, and the best-managed ones will average a return of at least 12% over a ten- to twenty-year period. The one disadvantage of mutual funds is that their values fluctuate, sometimes crashing down to half their value in a down economy. However, a well-managed fund will recover its value in a couple of years.
If you do some basic research before you start investing, mutual funds will end up being the best performing retirement investment vehicle in your portfolio.
In conclusion, the main facotrs to keep in mind when looking at each type of retirement investment are how much wealth you want to accumulate, at what speed, and how much you are willing to risk.