Investments
Want to know more about the topics below? Click the “+” icon to expand the field and read more.
Mutual Fund Investing: It’s a Turnkey Choice
Is investing in mutual funds the right choice for you? Consider the options here.
The amount of money Americans have invested in mutual funds is staggering, and there are sound reasons for that. The fact is that, in today’s investment world, keeping track of ever-changing global markets and the fast-moving pace of stock market transactions can be a daunting task, and it may even be impossible. And from a practical standpoint, most individuals lack the time and do not always have the necessary skills to trade consistently for themselves. Frequently, individual investors try to trade on important news that may not have gotten to them on time. So, they are trading late and may miss significant opportunities to either buy or sell.
Mutual funds provide individuals with options based on either short- or long-term investment goals. Essentially, people rely on mutual fund managers to make investment decisions and perfect their decisions based on the long-term investment strategies and philosophies of the funds. The buying and selling of stocks can be fast-paced and it takes a seasoned veteran portfolio manager to understand the vagaries of the marketplace.
But before you invest, it’s a great idea to assess your risk tolerance and time horizon. This means that even though there is a direct correlation between risk and reward, you still need to be able to sleep at night. Therefore, many individuals prefer a more cautious investment approach. Also, knowing how long your funds will be invested can greatly help ease your concerns about trying to make large profits overnight.
There are thousands of funds to choose from, and there are many services that evaluate fund performance over specific periods of time. Although you can learn how to interpret mutual fund performance yourself, it is frequently difficult to keep things straight if you are not working with funds daily. So relying on the help of a professional is generally the way to go. A professional also acts as a sounding board. Your questions get answers, and that’s what’s needed when you’re leaping into an area where you lack experience and knowledge.
For more information, click the links below to view videos on mutual fund investing.
Mutual Fund Investing, Part 1 | Mutual Fund Investing, Part 2 | Mutual Fund Investing, Part 3
Getting Started
Not sure where to begin? Click the links below to explore the various ways you can begin securing your financial future.
Executive Compensation: Keeping Competitive
In order to hire the best in your industry, develop a compensation plan that rewards key employees.
Business Succession Planning
Find out how to protect your financial independence and the future of your business with a comprehensive succession plan.
Retirement Planning: What You’ll Need
It’s never too late to begin preparing and saving for your retirement. Find all the information you need to get started today!
The Cost of College
The cost of a four-year college education is daunting. So, how can you build a college fund? Find out what your options are.
Fixed Annuities: Planning Ahead
With no contribution limits, a guaranteed rate of return and tax-deferred earnings, find out more about fixed annuities for retirment.
Although it may be true that current workers lack full confidence that they will have enough money to retire comfortably—according to some experts—it doesn’t mean there aren’t some good strategies out there to maximize income over a period of years. And one of the alternatives is an annuity.
Many workers take advantage of employer-offered retirements plan, such as the 401(k). And some also open individual retirement accounts (IRAs). These encourage people to save and to take advantage of tax benefits: they are both great ways to sock away money for retirement.
But there are limits to the amount of money you can contribute yearly to those plans. And it may be that when you sit down and add up what you think your retirement expenses will be and then add up your income stream for retirement, you will find that your income won’t be sufficient. Working longer is one route that many people take. Another is to put money into a fixed annuity (starting as early as possible), which guarantees a fixed rate of return, earnings that are tax deferred, and income paid to you according to a variety of different plans. Unlike some retirement plans, there are no limits to how much you can contribute to an annuity.
Since principle annuity contributions are not tax deductible, you don’t pay taxes on them when you start receiving income from your annuity. You do pay taxes on the tax-deferred earnings, but since your retirement tax bracket is likely to be lower than it was preretirement, the tax burden on your earnings is likely to be lower than it would have been earlier. Also, those taxes are spread out over the years you receive income from the annuity rather than having to be paid in one lump sum.
Fixed annuities provide many payout options, from payments for life, post retirement, to payments for a specified period. It’s a good idea to sit with your financial advisor before you choose among the options.
Provided you’ve been able to consistently contribute to your fixed annuity, it’s a great way to provide regular income during your retirement years.
For more information, click the links below to view videos on fixed annuities.
Fixed Annuities, Part 1 | Fixed Annuities, Part 2 | Fixed Annuities, Part 3
Variable Annuities: Saving for the Future
Looking for an investment that provides retirement income and a guaranteed death benefit? You may want to consider a Variable Annuity.
Employer-sponsored retirement plans, such as the 401(K) and individual retirement accounts (IRAs), encourage people to save for retirement and to take advantage of the substantial tax benefits they offer. But there are limits to the amount of money you can contribute yearly to those plans. If you think you can’t save enough money in your 401(K) and IRA for the retirement you envision, you might want to investigate another alternative, called a variable annuity, which allows unlimited contributions. When you are ready to retire, you receive your contributions and the returns as income, according to a payout plan you choose.
With a fixed annuity, your rate of return is guaranteed. However, the returns, although tax deferred, are relatively low, and your real rate of return—calculated after subtracting the effects of inflation over the years—may not be as great as you’d like.
A variable annuity is different. You choose where to invest your contributions—such as in stocks and bonds. As with other investing, you take a measure of your risk tolerance and can make your contributions based on that and your investment goals. And this type of annuity allows you to diversify within the different types of investments. Although the risk factor is greater for variable annuities, your earning potential is greater than with fixed annuities.
Your returns are tax-deferred, and if you choose to move your funds into different investment vehicles during the contribution period, you can do so without paying taxes. Your earnings are taxed when you start receiving annuity income, but the taxes are spread out over the payout period unless you choose to receive your payout in one lump sum, in which case all taxes would be due at that point.
In addition to providing an income stream in your retirement, variable annuities offer a guaranteed death benefit. This means that if you die before you receive the full amount of your payout, your beneficiary will inherit the greater of whatever remains in your account or a prespecified minimum.
Variable annuities could be a good source of retirement income because they have the ability to outpace inflation.
For more information, click the links below to view videos on variable annuities.
Variable Annuities, Part 1 | Variable Annuities, Part 2 | Variable Annuities, Part 3 | Variable Annuities, Part 4
Personalize Your Portfolio
Defining your goals, comfort level with risk, and investment time horizon can help you choose an investment strategy best suited to you. Learn more.
Whenever you review your personal investment portfolio you should have both your long- and short-term goals in mind. As you go through life, you’ll find that your goals are always changing or being modified to reflect your current planning situation—such as funding a child’s education, buying a new house, starting a business, or planning for an early retirement.
Personalizing a portfolio simply means that your choices for savings and investments will be based on specific criteria tailored to you and/or your family’s short- and/or long-term goals. You can develop a strategy that creates a feeling of comfort depending on your risk tolerance, time frame, and your objectives.
There is always a balancing act going on between risk and reward. The general theory is that the more risk a person is willing to accept, the greater potential for return. The converse is also possible. If you lower your risks, then your potential return may be lower. Also, over time, certain factors and conditions may cause your overall risk tolerance to change.
From a safety standpoint, most people incorporate diversification of assets into their overall investment and saving strategy. It is the old adage, “don’t put all your eggs in one basket.” Another fundamental question about portfolio planning emphasizes this point: once a person decides to diversify his or her portfolio, what percentage of his or her investments and savings should go into each asset category (a process known as asset allocation)?
Note that there is no “best time to buy or sell investments” because it is virtually impossible to predict the direction of gain or loss. Therefore, many people decide to be consistent by choosing to set aside a specific amount over a period of time to be invested regularly. Typically, people put aside money monthly for saving and investing. Over the long term, the value of specific assets will increase or decrease. Thus, more of an investment can be had for less money and vice versa. This concept is known as dollar cost averaging.
Your personalized portfolio is created based on your needs and is not frozen but always evolving.
For more information, click the links below to view videos on personalizing your portfolio.
Portfolio, Part 1 | Portfolio, Part 2 | Portfolio, Part 3 | Portfolio, Part 4