Stocks And Bonds
what is the best thing to invest in stocks, bonds, mutual funds? should i invest in all or what? help please.?
So my husband and I are in our late 20s and want to start saving for retirement and our kid’s future, what would you suggest we do?
Invest in stocks, bonds, mutual funds?
Any help is appreciated..
The key to long term investing is to manage your risk. You should be willing to take larger risks when you are young than when you are nearing retirement. Higher risks do not mean that you are going to take very high risks, only that you need some risk. Why do you need some risk? Rate of return is very dependent on risk. Items with very low risks may not even outperform inflation.
Generally, you do not want to be in bonds when you are in your 20s. The rate of return is too low long term. Picking stocks is also a bad idea. You need to diversify (spread your money out over a large number of companies). For this you use the mutual funds. Mutual funds can spread your money out over thousands of companies. If one company goes bankrupt, you wont even notice.
Now to pick mutual fund. If you are already in an IRA or a defined-contribution pension fund (such as a 401-k) you will have a list of mutual funds. If not, here is my advise. First, don’t follow advise from random people on the internet. Second, use a well known mutual fund screener. I prefer Morningstar ( http://screen.morningstar.com/FundSelector.html ). Do a little research first (use a search engine) to make sure that morningstar is real and I am not scamming you. Never trust investment advise on the internet. Morningstar will let you set your own requirements and give your suggested mutual fund. Learn about investing. Most people who are teaching about investing are selling something. Call your community college and see if they have a course or seminar in investing. Don’t buy on tips or trust advise unless you know the person who is giving it (and not even then). Build up your retirement over time. The most important thing to building retirement is to have a lot of years to do it with. Luckily you are still young. Little ups and down in the economy are not really important when you are going to invest for the next 40 years. Invest with your head not your heart. The best time to buy is when stocks are down. Your heart will tell you not to invest if stock is doing poorly. Finally, the longest the US stock market has ever been down is 10 years. You don’t want to sell into a down market. Once you are getting near 10 years of retirement, remember to start moving money away from your stock mutual funds into bond mutual funds. That way if a bear shows up (bear markets occur when stock is down) you can use your bonds and wait the bear out.
Finally, I can tell you I am a college professor that teaches this. (Which I am.) But there is no way you can tell if that is true. Check everything I have said and do your own research. Don’t believe what you read on the internet.
Bonds vs. Stocks
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