If you want to invest money for a better future and don’t want to constantly monitor your money, 2011 is as good a time as ever to invest money in funds. In fact, mutual funds offer most people the best investment options out there because they do the day-to-day money management for you. In the simplest of terms, here are some tips to help you invest money and find the best funds to keep yourself out of trouble in 2011 and beyond.
Keep in mind that you don’t invest in mutual funds to speculate in stocks and bonds. You invest in them because funds were designed as a way for millions of average folks to get a piece of the action in stocks and bonds with professional money managers making the investment decisions. Your job is to simply decide how much money to invest in each of the 3 basic types of funds, and then to pick the best investment options or funds in each area to fit your risk profile. Here are some tips, because 2011 and beyond could be a little tricky.
In order to really make your money grow over the years you need to invest in stocks. The average person’s best investment options in this department are equity (stock) funds. Equity funds range from aggressive growth funds that pay zip in dividends but can go up like a rocket in good economic times… to blue-chip equity-income funds that invest your money in large corporations that pay steady dividends with milder fluctuations in stock price. Since the higher a stock (fund) price soars the harder it falls, for 2011 and beyond I’d invest my stock money with the more conservative equity-income funds. It’s nice to get a 2% or 3% yearly dividend when you can hardly find 1% at the bank.
The second basic type of mutual funds is bond funds, and for 98% of the people they represent the best investment options for putting money into bonds. Millions of Americans invest money in bond funds, but few understand bonds, which is what these funds invest your money in. Here we keep it simple and go to the bottom line. If you want details, I’ve got a number of bond articles that go there. Simply said, you should invest money in bonds (funds) because they pay higher interest income than you can get elsewhere, and tend to balance out your overall investment portfolio.
Traditionally, bond funds can offset some losses from stock investments because they have often tended to be one of the best investment options when stocks were out of favor and in the dumps. In the bond department you can be aggressive or more conservative as well. For 2011 and beyond I would suggest you go conservative again because our economy and interest rate situation are precarious at best. Interest rates are near record lows and have been falling since the early 1980s. The economy is still struggling to grow with high unemployment.
What this means to you when you invest money in bond funds: when interest rates head back UP, SOME bond funds won’t be your best investment options. But remember, you need to invest money and keep it invested for the longer-term. You are not trying to speculate, but still need some money in these funds for balance. Your best investment in the bond department for 2011 and beyond: intermediate-term bond funds vs. long-term funds. The latter are too risky and will get burnt when interest rates go back up.
That takes us to the third and last of the basic investment options for funds and investing in general. Money market funds are very safe investments and pay interest income based on prevailing interest rates, which were historically low heading into 2011. Don’t avoid these safe investments because they have one redeeming characteristic other than safety: when rates go back up the interest they will pay will automatically follow suit.
So, yes you should invest money in mutual funds, now and in the future. The year 2011 will present challenges, but where else can you invest in stocks and bonds with professional money management working for you at a modest cost? Your objective should be to invest money and make the best of it. Your best investment options as an average investor haven’t basically changed much in over the past 40 or so years. You just need to focus on where to invest your money in funds so you can stay out of serious trouble when times are rough. Over the longer term, that’s the best you can do as an investor.