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Money Girl

157 MG Where to Invest in 2010

How to prioritize and choose the best investments.Like what you hear? Help us out by writing a review at iTunes. Questions go to money@qdnow.com. Thank you!

Broadcast on:
13 Jan 2010
Audio Format:
other

How to prioritize and choose the best investments.Like what you hear? Help us out by writing a review at iTunes. Questions go to money@qdnow.com. Thank you!

Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics, and managing it as one big, juicy investment. That's pretty good. Learn more at Fidelity.com/baskets. Investing involves risks including risk of loss, Fidelity Brokers Services LLC, Member NYSC SIPC. My dad works in B2B marketing. He came by my school for career day and said he was a big row as man. Then he told everyone how much he loved calculating his return on ad spend. My friends still laughing at me to this day. Not everyone gets B2B. But with LinkedIn, you'll be able to reach people who do. Get a $100 credit on your next ad campaign. Go to linkedin.com/results to claim your credit. That's linkedin.com/results. Terms and conditions apply. Linkedin, the place to be, to be. Hello everyone, and welcome back to Money Girl's Quick and Dirty Tips for a richer life. I'm your host, Laura Adams. This podcast is the third in our five-part series about taking charge of your finances in 2010. We talked about the importance of setting financial goals and saving money in the first two podcasts of the series. Today's topic is about where to invest your money. Before we get started, I want to make a distinction between the terms "saving" and "investing." We tend to use those words interchangeably, but they're really not the same thing. The difference has to do with taking financial risk. Saving is putting money aside without exposing it to any risk, or at least very little. Like in a savings account, a money market deposit account, or a certificate of deposit in an FDIC and short institution. Investing is committing money to an endeavor or account with the expectation that you'll make a certain amount of profit or income. The risk is that you'll receive less than what you expect, or worse, yeah, there's a possibility that you could lose your entire investment. Increased risk generally goes along with the potential to make more money. Therefore, taking calculated risk is an important part of your financial life. Without it, your money probably won't grow fast enough to achieve your goals. You can keep money safe and cozy in a low-interest savings account, but that stunts its potential and doesn't give it the opportunity to swell into a nest egg large enough to meet your long-term goals. The quick and dirty tip for investing is to expose your money to just enough risk to accomplish your goals. The money you'll need for small, short-term needs is well-suited for safe places like a savings account or CD, but the money that you're counting on to grow and multiply over the long-term, like for your retirement, needs to get friendly with some amount of risk that you can live with. Consider this, many financial advisors believe that not taking enough investment risk might actually be the riskiest move of all. That's because you could fall short of your goals or run out of money during retirement. Whether you avoid risk intentionally or have been simply procrastinating investing, the result could be devastating to your financial future. Don't make the mistake of thinking you should put off investing until the market "improves". Waiting to invest can cost you in the long run because you'll probably miss out on the market's best days, which can significantly lower your overall returns. A good strategy is to use an automated plan so your investments are spread out evenly over the year. Also, never think you should wait to invest until you have more money. Even if you only have a small amount to put aside, that's okay. Contributing just $50 a week over 25 years with a 5% return would give you over $129,000. Saying time is money is the absolute truth when it comes to building wealth for your future. If you're like me, having enough to retire is probably your number one financial priority. So here are my three recommendations for where to invest this year. Recommendation number one, invest in a workplace retirement account. Workplace retirement accounts include plans like 401Ks, 403Bs, and 457s. They offer nice tax advantages and are mandatory in my opinion if you also get company matching. A company match is when your employer invests a certain amount of money on your behalf when you invest your own money. Always contribute enough to max out a company match so you'll get as much free money as possible. For 2010, the contribution limit that employees can put into most workplace plans is $16,500 or $22,000 if you're 50 or older. Employer-sponsored plans make investing really convenient because the funds are deducted from your paycheck before you even see it. The only downside to a workplace plan is that it may not offer a huge variety of investment choices. However, if you have more than 10 years before retirement, choosing a stock fund is generally a good choice for an optimal return on your investment. Recommendation number two, invest in an individual retirement arrangement or IRA. IRAs are the second best place to invest. They're the answer when you don't have a workplace retirement plan or if you max out a workplace plan and still have more money to put away. IRAs offer great tax advantages with unlimited investment options, but you can't invest as much in them as you can with a workplace plan. The IRA contribution limit for 2010 is $5,000 or $6,000 if you're 50 or older. You can open an IRA at brokerage offices, banks or many online sites like etray.com, zeko.com, or sharebuilder.com. At sharebuilder, you're required to set up an automatic investment plan for recurring or one-time investments. If you set up a plan with them before January 31st, you get 10 free trade credits, which is a $40 value. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans or travel. Planning ahead is crucial in life, especially when it comes to what happens when you're gone. Getting life insurance may sound daunting, but policy genius makes the process a breeze. With policy genius, you can find insurance policies that start at just $292 a year for a million dollars of coverage. Some options offer same-day approval and avoid unnecessary medical exams. Policy genius's technology lets you compare quotes from America's top insurers in just a few clicks to find your lowest price. It's the country's leading online insurance marketplace. And if you ever need help or guidance, they have an expert license support team to answer your questions, handle all the paperwork, and advocate for you throughout the process. It's never too late to plan ahead. Go to policygenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's policygenius.com. My dad works in B2B marketing. He came by my school for career day and said he was a big row as man. Then he told everyone how much he loved calculating his return on ad spend. My friends still laugh at me to this day. Not everyone gets B2B, but with LinkedIn, you'll be able to reach people who do. Get a $100 credit on your next ad campaign. Go to LinkedIn.com/results to claim your credit. That's LinkedIn.com/results. Terms and conditions apply. LinkedIn, the place to be, to be. Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. A good IRA investment might be a target date exchange traded fund. They're called target date funds because you choose one that's closest to the year when you plan to retire or access the money. For example, if you're 35 years old and want to retire in 2040, you could choose the iShares S&P Target Date 2040 Index Fund, which trades as symbol TZV. Target date funds are very convenient for many investors because they automatically rebalance on a periodic basis to achieve growth in the early years and capital preservation as you approach retirement. Recommendation number three, invest in a taxable brokerage account. You can open a taxable brokerage account with brokerage companies or online sites like the ones I previously mentioned. Consider making taxable investments only after you've maxed out contributions to your workplace plan or IRA. The most important point to take away from this podcast is that you should start investing early and consistently. Investing less money sooner rather than more money later is the secret to investment success. Investors who start late usually have to make huge financial sacrifices to accumulate enough money to achieve their goals. If you have a workplace plan, consider increasing your contribution by 1%. Ask your benefits administrator for the form to sign up or to increase your current contribution. If your best investment option is an IRA, get it set up for a recurring electronic deposit from another account. Find the Grit and determination to always invest at least 10% of your income. I want to challenge you to stay ahead of the financial game by investing more this year. Thanks to everyone who's become a fan on the MoneyGirl Facebook page. You can get there by clicking through from the link at moneygirl.quickendertietips.com or by searching for MoneyGirl once you're in Facebook. Submit questions or comments there or email them to me at money@quickendertietips.com. I'm glad you're listening. Sha-ching! That's all for now. Courtesy of MoneyGirl, your guide to our richer life. The new John Deere Gator SUV lets you cut, pack, drive, scout, weld, stack, feed, pull, load, tow, spray, and haul. All in a single day. Because with the highest cargo box volume in its class, customizable features, and a towing capacity of up to 4,000 pounds, it gets the job done. You just have to get in the seat. Learn more at your John Deere dealer or visit jondere.com/gatorxuv. Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. [BLANK_AUDIO]