Is an annuity a good investment?
Is an annuity a good investment? This is a surprisingly hard question to answer.
If you have ever met with a financial advisor about investments, chances are he or she may have proposed annuities as a good way for you to go. However, when you scan the blogosphere for posts about investing, you hardly ever read about annuities. You read about index funds, mutual funds, stocks and real estate and now and then about bonds … but hardly ever anything about annuities. Continue reading...
What is a bond? What you need to know about managing risk
Bonds can be great low-risk investments but chances are you have never purchased a bond ... and probably never will.
Same with me.
How to Hire a Financial Planner (or Not)
Millions rely on financial professionals to do their investing for them but not everyone knows how to hire a financial planner the right way -- or when to say no to one.
On the surface, the rationale for hiring a financial planner or advisor seems valid. People feel intimidated by the whole investing thing. It seems like a jungle out there and, to boot, most people know someone who lost it all with bad investments. Others believe they just don't have enough time to learn about investing or to maintain their investments on an ongoing basis.
How to maximize returns while minimizing investment risk
Back in 2005, someone wrote that Priceline.com would be a good stock in which to invest. At the time, I used Priceline because I traveled frequently. I also knew of Peter Lynch's investing-for-success strategy, which boils down to buying stock in companies you do business with. I looked at the stock, which traded for around $20 to $25 at the time, thought about it … and passed. Was that smart?
Had I invested $1,000 back then, that investment would be worth about $55,000 today, just 10 years later. Priceline is but one of a hundred maximize-return stories you hear every day.
Not every investment is that good. I could also have invested the $1,000 in Yahoo at that time. That investment, however, would only be worth $850 today. The same investment in Bank of America would be worth less than $400 today. We call that risk. Continue reading...
Why buying individual stocks is a bad idea
Even if you've never made an overt decision to invest in the stock market, stocks form the foundation of your retirement investing. (At least if you're like the vast majority of Americans, they do.) That's because your 401(k) -- or equivalent employer retirement plan -- is only allowed to invest in mutual funds, and most mutual funds invest in the stock market.
If you are investing through a Roth IRA account, though, you do have options. You can invest in mutual funds (of which index funds are a subset) or you can buy stocks individually. Does that mean you should buy individual stocks for your Roth IRA?
Why investing can be better than repaying debt
It's a difficult choice: On the one hand, you understand the need to begin investing early to make the miracle of compounding work for you; on the other hand, you know that, when you have debt, making those payments hampers the ability to harness the miracle of compounding.
So, what should you do with that $500 you have -- invest it or pay down the debt? The answer is not as simple as some make it out to be.
Reasons to repay debt first
1. Risk of disaster
As I mentioned in the article about starting to save for retirement, life is not always fair or kind. Most of us depend on a paycheck for everything: rent or mortgage, food, gas, utilities and so forth. When something happens, like losing your job, divorce or severe illness, those checks get smaller, or may even disappear temporarily. We can cut back some of our expenses like gas, clothing, etc. But some things are impossible to cut back. That list is usually headed by rent or mortgage payments and those monthly payments all other forms of debt require. You can't cut those back in times of trial.
Starting to save for retirement at 40
There's something about reaching the big 4-0 that often causes you to re-evaluate your direction in life. And when you do, it's hard to escape the fact that your day of retirement is indeed approaching faster than you ever thought possible.
If you're one of those who eliminated debt and made investing for retirement a habit since your 20s, there's very little to do other than enjoy your 40th birthday and continue on with what you're doing. But if you're heading into your 40s having done nothing to prepare for retirement, the prospects can be downright scary.
Why you should make a home your first investment
Originally, this was to be a two-part series discussing the pros and cons of buying a home as opposed to investing. The purpose wasn't to pick a winner or loser, per se. (After all, one of the main tenets of Get Rich Slowly is that you really should do what works for you.) Instead, the purpose was to highlight the strengths and weaknesses of both options in case you were faced with a choice for some reason.
Holly Johnson's article should you buy a home or (invest?) was first; and she said that, if she had to make that choice, she "would invest for the future and forgo the house in a New York minute." I intended to explain the benefits of the opposite side of the hypothetical.
But you stole my thunder! So many people made great comments in response to Holly's post that I thought it would be better to explain what was left over or unclear for some reason. We both started by looking at the past.
How to invest in index funds
This is the third installment of a three-part series examining index funds. In Part I, we looked at the managed mutual fund market. In Part II, we looked at how an index is calculated and what an index fund is. In this installment, we'll consider how to evaluate index funds and where to buy them.
Despite the fact managed mutual funds still dominate the mutual fund landscape, there has been a steady migration of assets from managed funds to index funds and ETFs (most of which are indexed). In fact, there are more than 350 index funds from which to choose, so when you start to look into investing your money in an index fund, you'll need to understand these two things:
- What kinds of index funds are available
- Where do you get them
Types of Index Funds
Some people classify money market funds as index funds because they're passively managed, but money market funds are not based on an index. Instead, three broad categories describe how index funds are generally broken down, as shown in this pie chart from ICI data:
Should you buy a home or invest?
The path toward retirement and financial independence usually involves buying a home and investing for retirement and the future. But, what if you had to choose?
William Cowie posed this question to me recently and asked which path I would take to financial independence if given the option. My answer: I would invest for the future and forgo the house in a New York minute. Let's look at why I think that makes sense.
Performance Over Time - 1940 to Present
Throughout history, housing prices have appreciated over time. Because of this, both real estate investors and homeowners have built wealth with ease by building equity in their homes and properties.