Retirement planning is becoming a big challenge nowadays. In the good olden days the companies used to be the major contributors of your retirement savings in the form of pensions. Due to the decreasing trend in the pension now it is your responsibility to save more and to invest it intelligently. Some of these tips can help you to invest smartly.
A bond is nothing but a loan you are giving to a government institution or a corporation which agrees to pay you interest on the amount for a certain period of time. It is usually a fixed amount and is paid to you every six months or annually. After the time period of the loan is over the borrowers will repay you the original investment in full. This is called maturity of the bond. Bonds have a rating based upon their risk. The best rating is AAA. These kind of bonds have a fixed interest rate which doesn’t change throughout the time period of the bond. It would be a wise investment option.
Annuities are like a deal between the insurance company and policy maker. The insurance company guarantees the policy holder a fixed or varying return on the money he invests with them. These returns can be delayed so that you can benefit from them after retirement. The disadvantage of annuities would be the penalty if you withdraw your money invested before time. This is a good investment option if you have clear information about its process.
- Exchange Traded Funds
Exchange traded funds are funds which are traded on the stock exchange. They are traded in the stock market just like stocks. It has some advantages such as the administrative cost is low. This is particularly useful in retirement cases.
- Mutual Funds
Mutual funds are a professionally managed scheme of stocks and bonds. They collect money from investors to buy securities. It is a collective investment managed professionally. Open- ended mutual funds are those in which the shareholders can sell off or buy shares of the fund at any given point of time. As per the law the mutual funds need to get themselves registered with the Securities Exchange Commission in the United States. Mutual funds have been in the United States for a long time now. This is another good option for the people who are planning retirement.
A stock basically represents your share in the company you have invested your money in. If you have a stock in a company, it means that you have a share in every asset and every profit the company makes with your invested money. It does not matter how small your investment is in the company. The profit made by the company will be distributed to all the shareholders of the company. This is called dividends. So if you are planning to invest your hard earned money at the time of retirement you can invest in some good strong companies which are performing well consistently.