Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some
continued education for some credentials I maintain and it occurred to me that
we all could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
If you believe there is to be a market downturn, then
some of these tips are for you:
By Jeff Rose
Imagine approaching retirement and
watching your portfolio be cut in half. Maybe you don't have to imagine,
because it happened to you in 2008. While there are no surefire ways to avoid a
stock market crash, there are some things you can do to reduce the likelihood
that you will suffer the consequences of one in the future. Here's how to
protect your savings from a significant downturn in the financial markets.
1. Don't invest in the stock market. The best way to avoid a crash is not to get involved in the stock market in
the first place. However, you aren't likely to get a decent return without
putting at least some of your money into equities. And few people can save enough to retire comfortably
without the help of compounding investment returns. However, there are some
relatively safe ways to invest without losing your money to a crash.
2. Play it safe with money market accounts.
While money market accounts typically don't have a great
return on investment, they can be a safe haven for your portfolio if you can't
afford to take much risk. The good news is that money market accounts will
usually provide better returns than a certificate of deposit and are easy to
set up online.
3. Get a guaranteed return with annuities. If you want to avoid stock market volatility, still make a return and are
willing to hand over a chunk of cash to an insurance company, an annuity will
provide fixed payments for a set period of time or even the rest of your life.
I usually don't recommend annuities, but sometimes fixed annuities can make sense. If
you're looking for guaranteed returns, and don't want anything to do with the
risk of the stock market, annuities might be a good option for you. For
example, if you find a five-year fixed annuity paying 3 percent, at least you
are able to offset inflation.
4. Get an insured high-yield savings
account. There's nothing like an old-fashioned
savings account. In the United States, many savings accounts are insured by the
Federal Deposit Insurance Corporation or National Credit Union Administration
up to $250,000. If you're looking for the best protection for your money, this
is it. There are some great high-yield online savings accounts
with this protection. While you may not make as much money as in the stock
market, at least your funds will be safe. It's unfortunate that less volatile
investment vehicles typically don't have great returns, but it's important to
take advantage of accounts less prone to losses.
5. Invest with peer-to-peer lending
websites. Peer-to-peer lending is a relatively new
form of borrowing and lending where individuals lend money to each other for a
profit. Peer-to-peer lending websites make it easy to invest your money in
other people and track the status of your loans, and they offer pretty good
rates of return. But you also take on the risk of whether the person you are
lending money to will pay you back.
6. Diversify your portfolio. While equities make up an important component of the portfolio of most
investors, it's seldom a good idea to have all of your wealth tied up in the
stock market. Depending on your risk tolerance and proximity to retirement,
remember to temper your risky investments with bond funds and even cash.
If you're afraid of a stock market crash,
don't stuff cash under your mattress. It's important to keep at least some of
your savings in the stock market to take advantage of the historic gains. For
the rest of your savings, there are stock market alternatives that can yield a decent return with little risk.
Jeff Rose is
a certified financial planner, U.S. combat veteran
~~~~~~~~~
(As
with any of these informative articles, anyone who needs someone to talk to
about
this
very subject contact me and I can direct you to a knowledgeable advisor).
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Full post disclaimer in left column. PCN Home Page is located at: http://pcn.homestead.com/home01.html
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