Some companies offer a Deductable IRA, Non-Deductable IRA, or a Roth IRA retirement account to help you prepare for retirement. Most of the time what you get is minimal information to explain the choices available, and because of this limited information, what is best for you is hard to decide. The choice of low risk, medium risk, and high risk isn't much help. What kind of risk is there?
Questions start coming to mind. What is a fund?, what are the meanings of these different names given to funds, and what is the difference in each one? Or should you pick one of the dated funds that are supposed to be a pick and forget fund? Are dated funds any good?
Retirement accounts normally have "Funds" to choose from. Funds have names like Fidelity Global. The name tells us which investment company operates the fund "Fidality" and how the fund is investing(in this sample "Global" means invested in nations throught the world).
Other fund investment descriptions are, Value, Growth, Large Cap, Small Cap, Global, and International.
Lets start with "dated funds", these have a year at the end of its name, (2025). This is the year you expect to retire and start using the money you saved in this fund. These funds are new and have no history of performance. The recent huge loss in these funds in March 2009, showed that they are too heavily weighted in stocks. As the retirement year gets closer, risk of loss needs to be reduced. This will lower the chance of losing your savings at a time that you plan to need the money. Because of losses, these have been readjusted to be more conservative, but again I'm reminding you that these are untested and are new.
The other question, "what are funds" is an easy one. Funds are a blend of stocks, and many mutual funds also invest in government bonds - either U.S. or municipal. The money manager (the person who controls the direction of the investments in the fund), buys stocks and bonds needed to accomplish the goal of the fund.
Depending on where the fund is invested gives the fund its name. International, means that the fund is invested in nations other than the United States. Global, means that the fund is invested in nations throughout the world. The other descriptions in the names, is to describe the company size (by the dollars it's worth). The bigger companies will expose your money to less risk, and slower stable growth. Smaller companies are a greater risk of loss, but your investments growth could be faster.
Where to learn all this and more?
In March 2009 many people's savings were reduced a great amount delaying the start of retirement, or causing those that were retired the need to return to work part time to supplement the money that was lost. Many people learned that they needed to have an understanding of where the savings went, and how to control the money invested, so they could make informed choices. Some schools created classes to fill this need. (check local colleges for courses).
Learn online
If time is hard to find for taking classes, or you would like to learn in your free time, http://www.youcontrolinvesting.com/ allows you to learn at your own pace. We provide a textbook to study with, and use as a reference book for your future investing needs.
Learning on line is a great savings of time, you also have access to your instructor by email, and phone to answer questions as needed to help you learn.
Good Investing,
Bruce Cortez / Instructor
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Great stock advice
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