In a recent article I talked about how to improve your mutual fund performance by showing the basics on mutual fund investing . In this article though I’m going to walk you through what you should not specifically invest all of your retirement money in and why this could be bad for you.
First up, fixed investments should never be the primary place of your retirement funds. This would include certificate of deposits, money market accounts, bonds, or even online savings accounts.
The reason you should never invest 100% of your retirement investment into something like this is because most of these will never earn high enough returns to ever support your retirement. In fact the average certificate of deposit is only earning on average of 1.50% around this country according to Bank Rate.com.
With returns like that you won’t ever be able to retire. For example if you look at the chart below in the year 1925 what you buy for a dollar in that time would cost you $12 today. That’s over an average of 8% growth over the years.
Specialized And Speculative Funds
The next thing you should never invest for retirement 100% is specialized and speculative funds. These are funds that invest in things like real estate, commodities, or speculative funds such as high risk small cap funds.
These types of funds are all very volatile could cause you to loose a lot of money if done improperly. In fact while working in financial services we would occasionally come across people who would be doing this with their 401ks. What would happen is when they would sign up for their companies retirement program they would be ask to pick a few funds and end up picking the funds with the best returns.
The reality is just because on fund did well one year doesn’t mean it will the next. In fact past performance doesn’t ever guarantee future results. If you can live by those words you will never make this retirement investing mistake.
Finally, the last place you should never consider investing for retirement is international funds. You might be wondering why you should not invest money in these types of funds? The reason is because these types of funds are usually investing in emerging markets like China, and India.
These markets can be highly volatile and with out knowing much about them could be a huge risk by investing 100% of your assets in. Instead, for more safe investments stick with domestic funds within the United States.
To close this article I should mention that having your retirement investments all rapped up into anyone of these types of funds could be damaging to your retirement portfolio. Instead I recommend that you invest small portions into each of these.
The reason I suggest this is because giving up a small amount to seek higher returns is always fine but moving all of your money into any one of these can have some bad results. To get a better picture of how this could work for you contact your local retirement specialist today.