For those people who have managed to keep their jobs, the biggest problem they now face is how to keep their retirement money in tax-free investments. Besides the usual 401k’s and tax deductible IRA’s there are a few other strategies you can use if your income is too high to be able to invest in these tax deferred investments. Some of these other options include; Nondeductible IRA, Health Savings Account, as well as some well placed taxable accounts. The strategy in these taxable accounts is to know the tax rates on your investments, and to set your money up as to minimize the tax consequences.
When it comes to investing your money, there are many different strategies to consider. One of these strategies is to diversify your portfolio. There are many pros and cons to this type of investing. Diversification will not guarantee you the highest possible return. In fact, you are guaranteeing that you wont get the best return. Diversifying also doesn’t guarantee you that you wont lose money. What diversification does give you is a chance for high returns while also limiting your losses. For example, stocks and bonds offer the chance for greater income but have more risk. Instead if you invested in a mix of secure and risky assets, you still had the chance of earning a nice return however, you can reduce the risk of a big loss. In this recent downturn in the stock market, those people who had invested in all stocks lost far more than people who had a more diversified portfolio. The key is to have the right mix that is good for your investment strategy.
References:
http://money.cnn.com/2009/01/26/pf/expert/diversification.moneymag/index.htm?postversion=2009012817
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