We all know the Social Security System is failing with people living longer than ever before. We all know that it is unlikely that many people who are currently contributing to social security will ever see the money we’ve invested into the program. At least these funds are probably not coming back to darken our doors. This means we need to find alternatives and end our reliance on the government for a comfortable retirement that doesn’t appear to be in the woodworks. For this reason we are seeing more and more people in the twenty and thirty something generation taking matters into their own hands and investing not only for their retirements and the days when we can no longer work but also for those days when things happen and we need to fix broken houses, buy new cars, or pay hefty insurance deductibles for medical care. The problem with low risk investments for many is the fact that lower risks typically render lower yields. This means that there is less money to work with when that important day comes (at least in theory). Of course if you take a few larger risks along the way you still risk having less when the time comes to cash in your nest egg and rely upon it for a living or to take care of the needs we encounter along the way.
Common low risk investments include mutual funds and certificates of deposits though there are many stocks that would be considered low risk. While you can make a comfortable retirement for yourself by investing in mutual funds you won’t find the swift and bold flips, turns, and swings that you might find in the sales of certain high yield stocks. In fact, mutual funds are more the slow and steady wins the race sorts of investment methods, which are effective in their own right but, while providing comfort, will not bring copious amounts of wealth.
Another low risk investment for many is to go with childhood favorites such as Hershey, Mattel, GE, and other stocks that have been around for a very long time and have become almost a household name. The longevity of these companies makes them attractive for those looking for long term, low risk investments. They are relatively steady experience growth that often goes hand in hand with inflation. They do not generally experience the roller coaster ride that many stocks on various exchanges may go through so they are definitely not fodder for the manipulations of day traders. They are instead solid investments that while not flashy in their offerings are stable and that is something that low risk investors admire in stocks.
Certificates of deposit (CDs) have been known to offer significantly better rates of returns than many mutual funds and most interest rates for savings plans. If you are going to go the route of a mutual fund you either need to carefully consider how conservative you want your mutual fund to be (more aggressive funds can make more money than the average CD but you’ll need to carefully consider which will be best for your financial goals) before deciding which is the better option of the two for you.
If you choose to go with mutual funds there are several types from which to choose. The problem with mutual funds is that the funds that are doing well and netting high returns for its investors are often quickly inundated with new investors wanting the same results and there is only so much the manager can do to make good on the money that has been invested. There is another issue in which the fact that funds purchase such a small portion of so many stocks that when one or a handful of the companies that the fund is invested in do extremely well, the pool sharing the profits is so large that the impact is often negligible.
Investing in the stock market is taking a risk. The stock market is a volatile place as stocks are bought and sold throughout the day for considerable profits and losses. The reason this is possible is because the prices of stocks fluctuate wildly during the day just as they fluctuate from one day to the next. This leaves the market open to those who relish the opportunity to profit off the pennies that others will sell to save. It can be quite a lucrative practice but carries with it a level of risk that is almost equal to investing in penny stocks.
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