Financial Floating Manager

Archive for October, 2009

Traditional Investments Used for Retirement Investing

Saving for retirement is similar to saving for other things in that you have similar investment options. Here is a run-down of the traditional investments and how they can work as retirement investments.

Stocks

Stocks provide the highest potential growth of all retirement investments but also come with the highest potential risk. A higher allocation of stocks is best early in your career when there is plenty of time before retirement to deal with any downturns in the market.

Bonds

As a retirement investment, bonds provide a lower growth rate than stocks but are much less risky in an economic downturn. It is a good idea when saving for retirement, to increase your allocation into bonds while decrease retirement investment allocation of stocks.

Mutual Funds

Mutual funds encompass a wide range of different types of funds available. This can include anything from an actively managed fund to an indexed fund. Actively managed funds will typically invest in a mixture of both bonds and stocks in an attempt to beat the market. Index funds are cheaper because they are not actively managed and attempt to hold stocks or bonds as a mirror of the market and tend to perform close to the performance of the market.

As a retirement investment, mutual funds can be a good way to diversity your portfolio without the micromanagement that may be involved. Mutual fund allocation decisions should be made based on what types of stocks or bonds they invest in along with what type of asset allocation there is within the mutual fund itself.

Retirement Investing with Retirement Accounts

When saving for retirement, you have a few tools that are not available for other type of investments. These retirement accounts are built specifically to support your retirement investing. Here is a quick rundown of the different types of retirement investment accounts available.

401k

The 401k is an employer sponsored retirement investing account. Like all three of these investments, it is tax-deferred meaning that you are not taxed on the funds you place into these accounts until you withdraw them. 401k is the most popular retirement investment account and should be exhausted first because of the potential for employer deposit matches or contributions. There is a limit of $16,500 a year that can be put into your 401k.

IRA

An Individual Retirement Account (IRA) is similar to a 401k with the tax deferral feature. It only has a $5,000 yearly contribution limit and there is no chance for employer contributions. Once your 401k has been fully contributed to, you should put remaining money into your IRA until the limit is reached.

Annuities

Retirement Annuities are offered by life insurance companies and have very high fees of around 3% a year. These instruments should only be used for retirement investing if the specific features offered are worth the 3% fee. These retirement investments are rather heavily pushed by financial salespeople because of the very high commissions they provide. Make sure you are informed before diving headlong into something that could very well be a poor retirement investment choice for you.

Asset Allocation Strategies

Asset allocation for your retirement investing should depend primarily on age and distance from retirement. It is always a good idea to have a mixture of different retirement investments rather than focusing exclusively on one so you can diversify your portfolio and control for risk more effectively.

There are three phases of your life you should focus on when allocating your retirement investments.

Early Career

In your early career you want to build up your wealth through investments as quickly as possible. You also have a long time before retirement giving you ample room to regain any losses in the market. This is the time where you want to allocate the largest percentage of your retirement investments into high growth investments such as stocks. Always make sure to diversity and not put all of your retirement savings into just a few stocks to avoid unnecessary risk.

Mid Career

The middle of your career is when you want to start reducing your risk as to not wipe out a large portion of your retirement savings when you are preparing to retire. This phase is around 7-20 years before you are preparing for retirement. The range is rather large because as with all retirement investing, it depends heavily on your circumstances and we can only give general guidelines and things to consider.

At this point you want to tone down the level of allocation put into high risk and high growth retirement investments such as stocks. It may be tempting to keep a large portion there for the high potential growth, but if a market downturn similar to this recent one hits you at a bad time, you may have to spend more years working to make up those losses or deal with a reduced income or running out of money upon retirement.

Retirement

At this point of your life, you should already have a healthy amount of retirement savings due to your smart retirement investing. The goal at this point is to protect the money you have from loss and also from inflation. It is not enough to just put it into a bank account because your retirement savings will be chewed up by the average inflation rate of 3% per year.

To meet this goal you want to have a portfolio more heavily allocated to retirement investments that will hold your wealth steady. This means less in stock and more in bonds and indexed mutual funds.

Withdrawal Strategies

Upon retirement you will have your nest egg of retirement savings, but what is the best way to make it last? The general rule based on studies is that withdrawing 4% of the total each year and increasing the percentage with inflation is likely to net about 30 years of income from your savings. We can’t predict how long we will live so this step can be very difficult because if you live longer than expected you may run out of funds.

Additionally, if you are hedging against inflation in your account, there will still be upturns and downturns in the market. Not enough to wipe out your retirement savings but there will be fluctuations. To compensate, you can withdraw more of your retirement savings in boom periods and less in bust periods.

Withdrawal from your retirement savings can be further supplemented by other income sources. This could include a small business run by the retiree as a hobby / income source. The retiree can also work a part time job to bring in more money to allow the retirement investments more time to grow.

Conclusion

There are a variety of retirement investments available for the different life circumstances someone may be in. This article gives you an overview of your options and different things to consider when planning your retirement investments. It may be a good idea to hire a professional financial planner to help you assess which retirement investments best fit your life. Make sure this is a legitimate financial planner and they aren’t trying to sell you on things you don’t need to inflate their commission. The best protection against that is having base knowledge of the different options available yourself to avoid any major pitfalls. Saving for retirement is a very involved process and you should make sure you are putting in the time necessary to pick the best plan for your own retirement investing.

Are terms like ROI, diversification, cap rates, risk analysis, puts & call confusing you? If you are seeking to build your wealth for retirement or to achieve life goals, you need an investment plan. My guide to basic investment fundamentals is simple to understand. It’s always best to start young saving and investing but it’s never, ever too late to start.

Investment Basics

Investments are both a hedge against insecurities of the future from inflation and for increased needs for money such as for retirement. Critical to investing is the power of compounding. This is what makes investing attractive. Your future wealth is decided largely by the prudent investment plans you undertake now. Investments always comes with an element of risk. It is for you to weigh the level of risk with possible rewards. Understanding risk is the cornerstone of investment fundamentals.

Diversification is the key to good investment management. Spreading your assets and investments across various types of investment spreads your risk. You never want to put too much money into one category – such as all your money in one stock. Spreading you investments across stocks, bonds, real estate and other categories better insures that if one stock or investment category goes south, it will be minimized by other categories that are doing better.

Risk is about your comfort level. If you are young, you may be willing to take much larger risks, and potentially larger rewards, than if you are nearing retirement when you don’t want to risk losing the value of your portfolio.

Investments such as treasury bills, CD’s and bank deposits earn a fixed interest; and they are low risk. Stocks and mutual funds promise more growth potential. When they do well, you stand to gain because you earn money on the money your investment makes. Investment in property can bring you handsome returns but over a period of time. Those willing to take greater risks use leverage. That is, they use the banks money to make money. Borrowing to buy stocks, or borrowing to buy an investment property is riskier but gives you the potential to earn much more. Diversifying investments ensures that you don’t lose everything if a particular investment doesn’t work out well.

Funds: Decide the amount that you can set aside for investment. With right planning, you should be able to set aside and build up an investment fund. Ensure that you have built sufficient cash reserve to meet short-term emergencies. Six months of salary put away in a low-risk savings account is a good place to start. Plan your expenditures so as to redirect funds for investment. Put away a percentage of your pay increase to long-term savings investment.

Plan: Take a broader perspective when planning your finances. Chalk out your financial goals such as child’s education, retirement or buying a home. Analyze your current situation and determine your needs.

Knowledge: You should consider taking the guidance of an investment advisor. An advisor can help in tailoring your investment to suit your requirements. This would work well for those strapped for time and those who are not well-versed with financial planning.

Time: Investing in stocks and bonds is not everyone’s cup of tea – nor do you have the time to keep up on when to buy and sell. If you buy rental property, it takes time and effort to collect rents, handle complaints, fix problems, etc. Maybe REITs, which are like stocks in real estate, is a better alternative than owning property outright. Be realistic about the time you can put into managing your investments.

Expectations: Be realistic and reasonable about expectations on investments. While some may far surpass your expectations, sometimes investments may not pay off as well as they promised. Plan your tax liabilities too when overseeing your investment plans. Consider capital gains that may come into effect.

Preparation: Before placing your money towards an investment, weigh the cost of the investment. What are the broker and transaction fees if you are buying stocks or bonds. If buying investment property, carefully detail out all expenses and you will need to project them into the future.

The best advice is to start small and learn. As you gain confidence in yourself, it is easy to expand your portfolio.

Swing trading – a swing trader looks for short-term opportunities in the market to go long at a relative low, or get short at a relative high, with the expectation of closing their position in one to several days. Swing trading involves a longer time horizon than day trading, but avoid holding an open position beyond a week or two.

Swing trading can be effectively utilized on a part-time basis, allowing a trader to also have a day job. With the sophisticated conditional orders available through most online brokerages, it is not necessary to agonize over every market tick. A stop loss order will close your trade to limit losses, while a simultaneously placed order will capture the profits from your winning positions.

Investing tips – the stock market should present you with a wide variety of NEW stocks in 2009. Many of them are going to be new technology stocks that come from the financial, energy, & communications sectors. Investing tips – mostly seem promising, but the truth is that a good number of these trading & investing opportunities could be extremely risky, while others are simply not as good as they look. That’s why it’s very important to know how to choose among the best especially if you want to day trade them.

Why do so many investments fall through cracks? Experts blame everything from lack of information to wrong strategy and over-confidence about the swings in the market. Here, some tips that may get you find the tracks of investments.

1. Be consistent and organized. Make thorough efforts in whatever you do.

2. Be open to all the new thoughts and get out the myths of your bag.

3. Develop your own plans and play your own games.

4. Access quality investment information available at internet.

5. Diversify your knowledge and investments plans to various channels.

Investing Journal – this newspaper company has a price – to – earnings ratio of 11.3, a price – to – sales ratio of 0.93, a 5 year average return on capital of 17.6%, and a five year average pre-tax profit margin of 27.4%. Investing Journal – the Journal Register Company has an enterprise value – to – EBITDA ratio of 9.07 and an enterprise value – to – revenue ratio of 2.24. Obviously, this company is carrying a lot of debt. So, perhaps the multiples on the common stock price are deceptive.

Investing the stock market – Stock is a share in the ownership of a company. When a private company decides to divide its business and allows the public to be a part of the firm, then it sells shares of ownership through stock offerings. For example, if a company sells one million stocks and you buy one share, then you own one-millionth of that company and vice versa.

When a company sells stocks to the public for the first time, then it is called initial public offering or new issue. One of the major reasons of selling stocks is to meet the financial needs of the company for its growth and expansion. If a company plans for expansion and if the bankers of the company feel that borrowing money would be a heavy burden, they look to investors and/or shareholders to finance the growth of the company.

Investing commodities – now, brokerage firms offer a variety of investments, including equities, bonds, CDs, REITs, mutual funds, money market funds, government treasuries, real estate, options, futures, and other derivatives. The Internet, so crucial in relaying information, is an important source of data for today’s investors. The links herein relate specifically to investments and ventures.

Charts Candlestick patterns are used by each and every kind of trader. Day trading and swing trading utilize Charts candlestick as a way to read chart patterns quickly and efficiently, while getting the same data offered charts. Professional traders love charts candlestick because they can be read much quicker than a bar chart, while also allowing a different kind of technical analysis known as charts candlestick reading.

new investors – Investing is one of the most important decisions we must take. If you are new to investing then this is the best place to start. Investment is a learning process that requires one to implement their knowledge in a proper way. It is very simple to lose money and very tough to generate money. If you want to make your first investment you should get your capital in proper order. Once you started handling you expenditures, it will be must easier to start investment.

oil etf – all of the commodity ETFs (exchange traded funds) oil is probably the most exciting, as well as the most frustrating. Until very recently, the market price of oil ETFs has been steadily rising for quite some time. Is this a direct result of the increasing price of crude oil? In many ways it is. If you had invested in oil, in any capacity, a year or more ago, you are probably quite satisfied with your returns to date.

energy etf – This means that they watch the future prices and resources of the energies. For example, oil and gasoline are futures. These energy ETFs depend on the future prices of a barrel of oil as well as how much oil is being made and stored. In other words, will there be enough supply to meet the demand. If the prediction is that there won’t be enough, then the obvious follow up is that gas prices will continue to rise. Therefore, anybody owning these energy exchange traded funds are likely to make money on them.

10000 dollars – Some of the simplest strategies work the best but having 10000 dollars today to invest can be a daunting thing to do. Most investors start at the risk profile of any potential investment and doing this is the first step in making sure your investment not only pays off, but that your seed capital stays intact and is returned to you.

invest 10000 – Some of the simplest strategies work the best but having invest 10000 dollars today to invest can be a daunting thing to do. Most investors start at the risk profile of any potential investment and doing this is the first step in making sure your investment not only pays off, but that your seed capital stays intact and is returned to you.

investing 10000 – If each share costs ten cents then you can buy 10,000 shares with $1000. And if a share rises to $12 then you can easily earn $2000 by selling those 10,000 shares. You can sell the shares for $12,000 immediately after investing $10,000. That means you have not made 20% profit but its 100% gain.