Did you know the average person will need at least 750K-1.25M of assets to retire without any financial worries? When it comes to investing many people do not know how to diversify assets in order to take advantage of the most favorable route for their finances. The endless possibilities can be daunting but with research anybody can find the light at the end of the financial tunnel. If your company offers an excellent 401k/403b plan your first option should be there, but what if you wanted to diversify your options after you have contributed up to the match. Many online financial companies offer their services for a fraction of the cost a broker will end up costing clients. Companies like ShareBuilder, Schwab, TradeKing, and TD Ameritrade make investing fairly easy with very user friendly websites and low fees. For example TradeKing charges only $4.95 to trade stocks. Aside from the normal investing options of 401k’s, mutual funds, and Roth IRA’s, you can get a feel for a different aspect to investing that will eventually increase your cash flow and assets.
4 Non-Traditional Investing Options:
–Exchange Traded Funds (ETF’s): These are traded like stocks but are highly diversified like mutual funds with very low fees. ETF’s always follow a specific sector for example: Healthcare or Consumer Staples.
–Municipal Bonds: These offer tax free advantages and are considered safer compared to corporate bonds. These pay a semi-annual coupon and return your initial principle investment at the end of the term (Most are 10 years or more). This website http://www.investinginbonds.com/ provides very detailed information on bonds and how to go about investing with bonds. Do a little research on the municipality’s debt structure before investing.
–Dividend paying Stocks: Given how paltry rates are in this economy, some dividend paying companies average about 3% or more and can give you an extra paycheck on a quarterly basis, unless you decide to reinvest the dividend with the purchase of more shares. Companies like Johnson & Johnson and General Electric have been around for over half a century. Utility companies offer many great dividend choices as well.
–Annuities: An investment product marketed to those nearing retirement, but are highly frowned upon by many financial gurus in the media as having high fees and having high risk associated with these products. But these products can give investors a set income for life after purchasing. Look only at highly reputable insurance companies for these risky products for example, MetLife/Prudential. Don’t forget to look at the fine print associated with these products and avoid products which have a 5 year deferral time to get the monthly income stream.
Very important fact before buying dividend paying stocks is to research the P/E ratio, forecasted future earnings, and the Dividend Yield as these three details might give you a glimpse to how the company will perform in the future and how much you will actually make on a quarterly basis. The preferred Price to Earnings ratio financial experts in the field recommend is between 5% -20%, anything higher is considered overvalued price per share.
In concluding never forget to Watch your money!
Always remember that even though investments are protected by the Security Investor Protection Corporation (SIPC) there is always a certain degree of risk involved with any type of investment. So be well informed prior to making any decision. Calculation figures were provided by bankrate.com
Education is key. I would be nice to find out if there are any FREE investing classes for beginners. I was close to signing up for some online classes via InvestTools, but the price tag was not appealing at all. If you know of any, please let me know. Thanks!
I will let you know if I hear anything that's worth your time. Unfortunately most people are looking to push some type of product on you or sell you something at those financial meetings, its a gimmick. So your best bet is to get a investing book for now until you find a local finance101 class somewhere in your area. If you have any specific questions that you have email me in private, and i'll attempt to help you with more detailed information. Thanks for the comment.
Exactly, and I don't want to get caught up in that. I'm not looking to become a star stock investor (althought that would be nice :p) but looking more into establishing a few other investments accounts besides the usual 401k that would allow more hands on management. Again, we are not talking about lots of money to start off, but learning would be key. A source that would be reader friendly to non-financial folks like me 🙂 would be ideal.
@Yaz- I did some research and found a easy to read investing book for you, granted I have not readed it entirely as I only read the first couple of pages. But its got great reviews and the authors are on Tv and are very knowledgable about finance. How to speak money by Velshi / Romans. See link. http://www.amazon.com/How-Speak-Money-Language-Knowledge/dp/1118114957/ref=sr_1_1?s=books&ie=UTF8&qid=1328039054&sr=1-1