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Old 01-25-2014, 04:15 PM   #5
Wraisil
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Join Date: Apr 2004
Location: Acworth, GA
Posts: 219
My Ride: 2010 Infiniti G37
Choosing Investments:
There are a number of ways to choose your retirement investments and they start very simple and get more complex.

The simplest way is to invest in a target date retirement fund (or TDR fund). This is a fund that will automatically adjust the risk level of the investment portfolio based on time until retirement. However, these funds do not take into account any possible factor besides your investment horizon. A person starting to save for retirement at age 40 will have the same portfolio in one of these funds as a 40 year old who already has three times their annual salary in retirement savings/investments. If they both have the same goal then the person just starting to save will have to invest significantly more to reach that goal.

Slightly more complicated, but still relatively painless, is to talk with a financial advisor who can determine your situation and goals. They can then tell you what to invest in or manage your investments for you. This can be a free service (if included in your company plan for instance) or can be something you pay them for. Be aware, however, that some financial planners may steer to toward investments that are not necessarily the "best" choice for you if they get something for having people invest a certain way or in certain funds. If possible, ensure your financial advisor is paid only for their advice and not for selling products to you.

Even more complicated, but still not entirely "daunting", is to choose your investments by yourself. When doing this I recommend that anyone without significant time, as well as a significant education regarding finance, stick to only investing in funds (whether they be mutual funds or exchange traded funds (ETFs) and that they not try to "pick stocks". Picking stocks instead of investing in funds reduces the diversification of your investment portfolio. As such, I feel that "picking stocks" should be left to those who have the time and education to understand exactly how to do that (something I will not be covering here).

For this method, the first step is to discover what "type" of investment portfolio fits your needs. There are 4 "main" types of investment portfolios: Income, Income and Growth, Growth, and Aggressive Growth.
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