Leveraging Your Financial Intelligence by Douglas Lennick & Roy Geer & Ryan Goulart

Author:Douglas Lennick & Roy Geer & Ryan Goulart [Lennick, Doug & Geer, Roy & Goulart, Ryan]
Language: eng
Format: epub
ISBN: 9781119430841
Publisher: Wiley
Published: 2017-10-23T00:00:00+00:00

Put Your Investments in a Variety of Financial Instruments

Develop the discipline of placing your money in varied places, such as cash or cash equivalents i.e., a bank savings account, money market account, and CDs (certificates of deposit). Also diversify by putting some of your money in equity investments, such as stocks or real estate; fixed-income investments (government or corporate bonds); or insurance, such as life insurance, disability insurance, or long-term care insurance. When you establish your investment routines, make sure that the places to which you allocate investments are diversified. Having money in different places ensures that whenever you need money, and for whatever reason, you will have a smart place to get it. That also implies that you should put money away in instruments that have minimal or no risk, such as money market funds. You can also systematically buy government bonds, which are guaranteed by the government that issues them. Even in difficult economic times, it is unlikely that the U.S. government is going to go out of business.

To invest for retirement, you can also regularly put money into a tax-deferred retirement plan such as a company-sponsored 401(k), an IRA (individual retirement account), or tax-deferred annuity. To prepare for the “certainty” of your children's college expenses, you can also set up special college savings plans (so-called “529 Plans”) that include mutual funds. In addition, you can buy stocks, bonds, or mutual funds outside of any special plan for retirement or college savings.

When making decisions about how to save and invest your money, avoid the temptation to put all your money in any financial instrument that is currently performing at a high level, for example, a top-performing mutual fund or a real estate investment in a hot market. As we're writing this in June 2017, many people are investing in the latest phenomenon—the digital currency Bitcoin, up more than 200 percent over a period of six months. One bitcoin investment vehicle, the Bitcoin Investment Trust, recently soared 1,600 percent in a single month. Many experts warn that Bitcoin is in a bubble and headed for a correction. Like Newton's apple, “What goes up, must come down.” A high-performing fund this month can crash and burn next month. So, don't put all your eggs in one basket. This advice sounds like a no-brainer, but it bears repeating, since so many people are seduced by the prospect of making a lot of money in a short time.

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