Investing Money in 2014 and 2015 for Retirement – An Old Pro’s Viewpoint

Investing money will be tougher in 2014 and maybe 2015 and beyond, and putting together the best investment portfolio might mean investing money for safety vs. higher investment returns. The best investment ideas are slim pickings. There is very little that is normal in today’s world of finance. My reasoning and background follow.

Investing Money in 2014 and 2015 for Retirement - An Old Pro's Viewpoint 1

In 1971, I had my Masters in Business (finance) and knew nothing about the investment world or investing money. I found it quite embarrassing because the adults I would meet in the business world thought I might have the best investment ideas in my pocket due to my education. The years that followed were not the best investment environment, and I became a stockbroker in Columbus, Ohio, in 1972. I quickly learned what my job was all about selling investment ideas… SELL the sizzle, NOT the steak… My sales manager informed me.

Forty years later, investing money is a game that I find has changed little. It’s impossible to find the best investment, and the world of investing money is primarily a sales game aimed at uninformed investors (more than 90% of the investing public). I once read that NOW is always the hardest time to invest money. I’ve seen difficult times in the markets for over 40 years, and I’ve NEVER repeated that phrase until now: The Haze.

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At this time, I am afraid that it is true. Allison and I have three children, all 30-something, and trying to make it in a difficult world. Investing money for retirement is not an option for them. It is an absolute necessity if they don’t want to work for the rest of their life. Many folks my age are covered by pension funds plus other entitlements, but that’s not the norm for 2014 and beyond. Now, let’s get down to business and talk about investing money in 2014 and beyond and the best investment ideas I can muster as an older (but still on top of my game) retired financial planner.

If you have a 401k at work, participate in it and maximize your employer’s matching contribution if your company offers this feature (it’s free money). Investing money here is automatic and almost painless. This is one of the best investment ideas for accumulating a nest egg for retirement. Plus, the tax advantages will make you smile each year at an income-tax time.

Open a Roth IRA with a major NO-LOAD mutual fund family and start investing money each month through their automatic investment plan. Enter “no-load funds” into a search engine, and you’ll see some of the biggest and best fund companies at the top of the page, names like Vanguard, Fidelity, and T Rowe Price. Give them a toll-free call if you have questions – whether you qualify, how much you can invest a year, and whether they will send you free literature. A Roth IRA (or Roth 401k if available) is one of the very best investment ideas for accumulating money for retirement. A Roth account (IRA or 401k) is TAX-FREE investing if you follow the rules. Tax-free is as good as it gets and difficult to find.

Mutual funds are the average investor’s best investment vehicle because they offer both professional management and instant diversification in the form of a managed portfolio of stocks, bonds, and money market securities. When you invest money in a fund, you own a tiny part of (own shares in) an extensive investment portfolio. There is always a cost to investing money in funds. All funds are charged for yearly expenses. This can amount to less than 1% a year in NO-LOAD FUNDS, with no sales charges when you invest money and no extra ongoing management fees. Or, you can pay 5% in sales charges off the top when you invest money, 2% or more for yearly expenses, and 1% to 2% in additional management fees if you work through a sales rep (financial planner, adviser, or whatever).

One of the best investment ideas for 2014, 2015, and beyond is to keep your cost of investing money as low as possible. This could make a difference of tens of thousands of dollars over the long term. A dollar saved is a dollar earned.

Do all you can to learn about investing money, especially learning about stocks, bonds, and mutual funds. Once you understand stocks and bonds, getting a handle on mutual funds is a piece of cake. What are the investment options inside your employer’s 401k plan? The vast majority of them are likely mutual funds – mostly stock funds, bond funds, and balanced funds (that invest in both stocks and bonds). One or two safe investment options will likely pay interest: money market funds and/or a stable account.

Due to today’s investment environment, investing money successfully in 2014 and beyond could be very difficult. First, record low interest rates mean those safe investments that pay interest are paying close to nothing. Second, bonds and bond funds pay more interest, but when interest rates return to normal levels, they WILL LOSE money; that’s how bonds and bond funds work. Third, stocks and stock funds are pricy, having increased in value and price well over 100% since 2009. In other words, the best investment ideas are few and far between.

Here’s the best investment strategy in 2014 and beyond for beginners who want to start investing money for retirement and keep it simple. In a 401k and Roth IRA account, invest (monthly or each payday) equal amounts into a stock fund, bond fund, and money market fund. If your 401k has a stable account option, use this instead of the money market fund if it pays more interest.