Stocks & Mutual Funds
2020 has been a bumpy year for sure and that goes for investments as well. They go up and then they go down...so should you invest in them? Yes, they should be a part of your retirement portfolio, but how you invest in them matters. Historically their return has been 10-12% and 2020 has not been much different.
While there is always some risk involved, there are ways to reduce that risk-- diversification. There are 3 ways to buy stocks: Single Stocks; Exchange Traded funds (ETF); or Mutual Funds.
#1: Single Stocks. With this option, you are betting on the results of just one company. With single stocks, you are trying to “time the market” on when to buy and when to sell to make money. Most stock traders try to sell within a few days or weeks of buying to make a quick profit. I do not recommend this--there is too much risk for your retirement plan to be built upon single stocks.
#2: Exchange Traded Funds (EFT). These a cross between Single Stocks and Mutual Funds. These are funds that contain stock from different companies but are traded like single stocks. I don’t like these either, because you are still trying to time out the market. While they may have lower fees than Mutual Funds, you can lose a chunk of your returns by being charged for each month you invest.
#3: Mutual Funds. These are my favorite. They are a group of stocks from different companies, giving you a level of diversification in each Mutual Fund. Mutual Funds are a “buy and hold” product, so you don’t have to think about them, you just let them sit and grow. You can even further diversify your retirement by having various types of Mutual Funds.