If you have a regular, traditional type of pension plan, then your employer is responsible for making all of your investment decisions in your place. With most other types of retirement plans that are out there, however, you are the one that is in the driver's seat. Some people believe that it is intimidating to be in charge of their investment options but it really does not have to be. There are a number of different investment options that are available to you when it comes to putting together a retirement plan including stocks, mutual funds, bonds, ESOPs, annuities, cash equivalents and more.
Putting all of your money into a single type of investment is going to increase your risk of experiencing loss if the investment does not perform in the way that it was meant to. What this means is that you should make a point to spread your money out over a number of different types of investments in order to benefit the most.
Stocks, Mutual Funds and Bonds
When it comes to investing for retirement, it is important for you to look at things on a long term basis. Because your retirement earnings are going to grow in a tax deferred way and because it is going to be many years before you are going to make any withdrawals, retirement plans tend to be best suited for the most aggressive investing that you can muster, including for example mutual funds and stocks. Do not make the mistake of putting every dollar in money market funds or GICS which are Guaranteed Investment Contracts, but rather you should be diversifying your investment portfolio so that you can balance the risk with the reward, and you should definitely come out ahead in the long run as a result.
This does not mean that you should not choose your investments as carefully as you possibly can, however. If 80 percent of all of your retirement funds are invested in mutual funds and stocks, then most of it should be placed into funds that are well established and that have a history of a solid level of performance. If you are looking to become more aggressive with some of your money then you should place a very small percentage of your investments in stocks into higher risk types of funds to see how they can perform.
ESOPs
Employee Stock Options or ESOPs give you a great opportunity to own stock in whatever company you are being employed by. These ESOP plans are capable of benefiting you greatly, but there is a vitally important caveat for you to consider which is that you should never, ever put all of your eggs into one basket. There are thousands of employees that did this, and they ended losing out on all of their retirement funds because the stock for the employer eventually lost value as a result of shaky or corrupted accounting practices hiding serious problems with financials.
Photo Credits: tiffany bridge
Originally posted 2009-08-19 03:31:15. Republished by Blog Post Promoter
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