Your Portfolio: What Financial Planning Do You Need?
Saving a portion of your income for a rainy day as well as for retirement is just common sense. However, finding investments that will make the most of your hard-earned money can be an arduous task. Here are a few tips to help you get started creating that important financial portfolio.
Whether you are 25 or 55, planning for retirement is important, especially if you are not working at a pension-based job. The younger you start planning for retirement, the better, as Social Security is generally not nearly enough money for most people to live on. So consider some type of retirement plan such as a 401 (k) plan, which may be offered by your employer. Each month a portion of your income is deducted and placed in this account, and usually a portion of the funds are matched by your employer. It is wise to put aside at least as much as your employee will match; otherwise, you are just losing what is essentially free money.
A 401 (k) plan is generally not enough to really allow you retire, unless the amount you put in and the amount matched are particularly high. In most cases, it is wise to also consider an IRA or Investment Retirement Account. For couples earning about $150,000 or less and single people who earn about $95,000 or less, a Roth IRA might be a good option, although there are other types of IRAs. A Roth IRA is nice because you can make withdrawals without a penalty anytime you need to, so if an emergency comes up, you'll have some cash reserves. Also, the money is taken out after taxes, so you won't be paying taxes to Uncle Sam after you retire.
In years past, investing in one specific company has certainly yielded some pretty amazing results. In general, however, few of us are lucky enough to get on at the ground floor and then ride a stock all the way to the top. While the stock market is gaining strength, it's still a bit dodgy to put a large amount of money into just one holding. However, investing in mutual funds offers a lower-risk way to capitalize on long-term market growth. These funds are highly diversified to lower risk and professionally managed to make things simpler for the consumer.
There are several different forms of mutual funds, but two of the most common are exchange-traded funds (ETF) and open-end funds. The open-end fund is positive because at the end of every market day, an investor can sell back their shares and the fund must re-purchase those shares. You also have no limit on how many shares you can purchase. An ETF is slightly different because its value goes up and down during the trading day while the open-end fund's value is set at the end of each trading day. With an ETF, you can sell during trading and possibly sell at a higher price than what you would have received after the markets have closed.
There are thousands of mutual funds, and each is unique. For example, you might wish to invest in some type of energy fund. This might be a fund or ETF that invests in energy-related holdings such as petroleum companies, natural gas companies or oil drilling companies. Another option would be a clean energy fund that invests in companies that produce products to harness wind energy, hydroelectric energy or solar energy. In addition, you could invest in a specific country or perhaps a region. A BRIC fund, for example, invests in holdings in Brazil, Russia, India and China. A China fund will include holdings only from China and Hong Kong. There are many other options to consider, so talk to your financial planner about the possibilities you might want to consider.
Whether you are 25 or 55, planning for retirement is important, especially if you are not working at a pension-based job. The younger you start planning for retirement, the better, as Social Security is generally not nearly enough money for most people to live on. So consider some type of retirement plan such as a 401 (k) plan, which may be offered by your employer. Each month a portion of your income is deducted and placed in this account, and usually a portion of the funds are matched by your employer. It is wise to put aside at least as much as your employee will match; otherwise, you are just losing what is essentially free money.
A 401 (k) plan is generally not enough to really allow you retire, unless the amount you put in and the amount matched are particularly high. In most cases, it is wise to also consider an IRA or Investment Retirement Account. For couples earning about $150,000 or less and single people who earn about $95,000 or less, a Roth IRA might be a good option, although there are other types of IRAs. A Roth IRA is nice because you can make withdrawals without a penalty anytime you need to, so if an emergency comes up, you'll have some cash reserves. Also, the money is taken out after taxes, so you won't be paying taxes to Uncle Sam after you retire.
In years past, investing in one specific company has certainly yielded some pretty amazing results. In general, however, few of us are lucky enough to get on at the ground floor and then ride a stock all the way to the top. While the stock market is gaining strength, it's still a bit dodgy to put a large amount of money into just one holding. However, investing in mutual funds offers a lower-risk way to capitalize on long-term market growth. These funds are highly diversified to lower risk and professionally managed to make things simpler for the consumer.
There are several different forms of mutual funds, but two of the most common are exchange-traded funds (ETF) and open-end funds. The open-end fund is positive because at the end of every market day, an investor can sell back their shares and the fund must re-purchase those shares. You also have no limit on how many shares you can purchase. An ETF is slightly different because its value goes up and down during the trading day while the open-end fund's value is set at the end of each trading day. With an ETF, you can sell during trading and possibly sell at a higher price than what you would have received after the markets have closed.
There are thousands of mutual funds, and each is unique. For example, you might wish to invest in some type of energy fund. This might be a fund or ETF that invests in energy-related holdings such as petroleum companies, natural gas companies or oil drilling companies. Another option would be a clean energy fund that invests in companies that produce products to harness wind energy, hydroelectric energy or solar energy. In addition, you could invest in a specific country or perhaps a region. A BRIC fund, for example, invests in holdings in Brazil, Russia, India and China. A China fund will include holdings only from China and Hong Kong. There are many other options to consider, so talk to your financial planner about the possibilities you might want to consider.
About the Author:
Cleveland Jernigan likes writing about investments. For further info about Asian Pacific mutual funds or to know more about China investment funds, go to these fund websites today.
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