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Financial Literacy Month: Other Investments for Retirement

by on April 13, 2012

By Meghan Stewart

For the last day of our Retirement Roundup for National Financial Literacy Month, we’re taking a look at other long term investment strategies and the various places you can invest your money for the maximum benefit when you retire. You want to know you’re making the right choice for your money. After all, the last thing anyone wants is to lose the money they worked so hard to save and invest in their retirement!

So how do you know where to put your money that it will grow the most, but still be safe?

In truth, there’s no one perfect investment solution. What feels safe for some may feel too conservative for others. It all depends on what you have, what you want to achieve, and how much of a risk-taker you are with your money. As the Great Recession has shown, no investment is a 100% safe investment, but it’s all about managing the risk and making the right decisions for your money.

Here’s a look at some of the most common long term investment options with some pros and cons of each:

Real estate.

In the past, this was considered one of the safest possible things you could do with you money. It was always assumed that you could buy a house, let the property value increase over time and end up with a large amount of equity you can use once you reach retirement age. You could sell the home to get your RV and tour the country or even take out a reverse mortgage to use all that equity you have built up. Of course, the collapse of the real estate market caused a huge panic forcing many to change their opinion about real estate investments assuring people that it is not a safe investment after all.

While the collapse of the real estate bubble sent property values plummeting, this was largely due to over-inflated prices that were well beyond the actual value of the house. Since the housing bubble collapse, property values are back to where they once were. If you bought a home in the past few years, we know that the collapse was heartbreaking to watch, but now the real estate market is primed and recovering again as a sound investment. You can take advantage of ridiculously low interest rates right now, and particularly if you make sure to buy in an area where housing is recovering.

Bonds.

Bonds tend to be thought of as the safe investor’s best friend. They’re supposed to be fairly secure and although they don’t have as great of a potential for yield as some of their riskier counterparts, you do see some nice returns on long-term bonds. Particularly when you’re talking about U.S. Treasury Bonds, the thinking has always been that these are the safest investment around—because short of a total government fail, you don’t have a large amount of risk.

Of course, if you’ve been watching the news, you may have heard of bonds suffering in the past few months. This is because many big investors switched to bonds in order to avoid losing money in riskier investments. Now that the market is recovering in other sectors, these big investors are selling off their bonds and moving their money back to other markets. While this selloff has brought down the value of bonds temporarily, bonds are a market that tends to bounce back easier than other investments, so bonds are still a good bet if you’re looking to leave your money completely alone and let it grow at a modest rate.

Stocks.

Playing the stock market can sound a little intimidating to most people. Even in a normal economy, the idea of putting your money into the stock market may cause the average person more anxiety than anything. Now in an economic downturn when the stock market can be fine one day and start plummeting the next, the stock market seems downright terrifying.

Right now, the stock market is highly uncertain, but if you have a steady hand and can avoid panicking at every move of the market, you can still make money in the long term. If you’re looking to get into stocks and you’re completely new to the investing world, it’s often best to get a financial strategist or planner who can help you decide the best places to put your money. Make sure to communicate your exact goals and the level of risk you’re willing to accept. They can help you create a long-term stock strategy that will protect your investment as much as possible while still getting you an attractive return on your investment.

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