Good Financial Investments: Did You Pick The Right Ones

In a recent article I showed you how to go about picking good investments for you retirement portfolio by using a risk tolerance quiz developed by a company called Morning Star.  So in this article I’m going to give you a few other tidbits to look at as well and in the end hopefully by the end of this article you may have realized if you’ve picked the right ones or not.

Past Performance

As a previous financial representative I can tell with all the people I’ve dealt with over the years one thing is certain.  Not many of them looked the three things I’m about to cover. First off, we have the past performance of the funds your looking at investing into.

Now I know that past performance does not indicate future results but it does give you a good idea as to what lies ahead for the funds you are choosing.  For example in the picture below you can see an example of a few funds offer by Vanguard.

If you notice in the picture above I like to look at the inception number column.  This column shows me what the fund has done from the day it started.  The reason it’s better to look at this column versus say the 1 years average returns column is because it will give you a long term approach of how this fund might do over the next few decades.  In fact some people will only look at the 1 year returns and end up always chasing the fund that has the best return.  This not a good idea and is a sure way to destroy your retirement.

Cost

The next thing to look at is the cost of the funds you are buying.  I can tell you in all the years I spent helping people save for retirement not one person told me that a fund was to expensive.  In fact as a financial representative I was required to show them and no one ever thought twice about questioning it.

This leads me to the point that most people pay way to much for their investments.  In factI  find a lot of times people will pay brokers up to 6% in upfront commissions and annual expense fees of  up to 1.5%.  The truth is their are much better deals out their than this.  In fact below is a picture of one of Vanguards funds.

Notice how low the fees are compared to similar companies.  The expense ratio is only 0.18%, that’s damn cheap.

Type Of Funds

Finally, you need to consider the type of funds your investing in.  Some funds are riskier than others.  This may have prompted you to stay in the least risky investments.  However being in these investments can be a risk as well.  You may not lose as much money with these funds but you’ll struggle to get high enough returns to build a solid retirement.

Instead stick with a mix and variety of different funds.  In fact a good portfolio will have funds invested into everything from conservative investments like bonds, Tbills, and even cash to riskier investments like stocks, real estate and commodity funds.

Now that I’ve shown you a few things to look at on your portfolio I suggest you take the time now to see if you meet all the criteria I’ve covered above.  You might be surprised at what you find.