In the financial atmosphere of today, one of the biggest common concerns is with retirement. With life expectancies increasing and prices rising, the price of the golden ticket out of the rat race is higher than ever. Sitting idly by as your employer 401k gains pennies at a time is no longer a sure thing. To unlock the potential of your retirement fund, it is essential that you become more proactive with your saving efforts today, and there are a few very simple things you can do to get the most out of your money in 2014.
Play it Safe, but Savvy
As an investor gaining experience, you may encounter a variety of potential investment types, some of which can seem extremely lucrative. However, a universal truth in finance is that the greater the potential reward of an investment, the greater the risk. What seems like a way to make a fortune overnight today could see you wake up without your investment tomorrow, so it is important to minimize your risk. You can use the Suncorp superannuation calculator when you’re planning your retirement, to get a good idea of your current retirement status.
A mutual fund represents an outstanding balance of safety and potential. These professionally managed investment tools are composed of various stocks owned by a group of people. They are run by veteran investment professionals and typically well-diversified, so it is a safe bet that your money will grow in such a fund.
Keep Your Costs Down
You can find a rock-solid investment prospect, but if your capital is constantly being eaten up by taxes and fees, you are limiting your ultimate reward. Open an IRA with a no-load mutual fund, which allows you to transact shares of the fund with no management fees. Many no-load funds perform comparably to their fee-laden counterparts, and more of your investment is free to work for you. A Roth IRA is an excellent option, as it allows you to invest tax free as long as you meet the requirements.
To be eligible for a Roth IRA, you must earn less than $114,000 as an individual and $181,000 as a married couple. Every dollar saved will be there when you need it, and avoiding unnecessary fees will ensure that it has as much company as possible.
Mutual funds are generally reliable, but do not offer the most in expedient profits, as current interest rates are at record lows. For this reason, a mutual fund should be only a part of your total investment portfolio. These crawling interest rates make an ideal market for bond funds. A bond is a certificate given by an issuer to a holder in exchange for money. It is essentially a loan and accrues interest over time that is paid to the holder.
When interest rates are low, the issuer’s debt to the holder lowers and increases the value of the bond. Placing money in a bond fund is a way to gain a stake in this value, although if interest rates increase the bonds will quickly lose value. Fortunately, interest rates are currently at a near-standstill, making bond funds a good short-term investment, although rates are forecasted to rise in the coming months.
The high debt level also makes a money market fund an excellent option as well. In a money market fund, investors provide capital to a pool in the same manner as a mutual fund, but the money is used by the managers to invest in financial securities such as Treasury bills and other money funds such as commercial paper, which provides liquid assets to companies to increase their immediate liquidity in exchange for a share in the future profits. It can provide nearly all the stability of a bank account with a higher potential yield, particularly in 2014, where companies will continue to struggle with liquidity in the wake of trying economic times.
Growing wealth in 2014 is much the same as it always was: if you use your resources wisely, you will be rewarded with profit. A mutual fund is a great base for your financial plan this year and any other, but when it comes to building money right now, a bond fund could yield higher returns short-term and a money market fund is potentially the most lucrative investment type in the current marketplace. All three of these investment types have their own unique benefits and should be incorporated into a balanced financial portfolio.