It's really no surprise that people are afraid of investing after the economy went bad. The truth is many people lost their retirement savings, but what many people don't realize is that those who left their money in their 401ks and IRAs, actually gained money since the drop. Many people who stuck with their plan are up 6%. Still, it pays to be careful. Here are just five tips for careful investing in a rough economy.
Do Your Homework
Before you invest any of your money, you need to do your homework. This means researching your options for investing, checking the stocks you want to invest in and how they've preformed, etc. You cannot simply go to an investment broker and hand over your cash. Well, you can, but it's never a good idea. You need to know where your money is going and whether or not it's a good decision for you.
Opt for Gold
Gold is a very safe investment in hard times. In fact, the cost of gold has rose significantly since the
recession began. It's important to know that gold is very expensive, costing over $1500 per ounce at the time of this writing. Remember that this is scrap value. Coins and other collectables made of gold may be worth more than scrap value.
Choose Low-Risk Stocks
During a rough economy, you may feel more comfortable choosing low-risk stocks. Low-risk stocks don't earn as much money as high-risk stocks, but it is less likely that you will lose money with these stocks. Researching the company will give you a better idea of whether or not the stock is considered low-risk.
Create a Diverse Portfolio
You should never put all your money into one type of investment. It pays to have a 401K, IRA, bonds, CDs, etc. You want a diverse portfolio so that something is always growing, even if another investment is shrinking. This will help even out your investments.
Invest What Your Employer Will Match
Last, but not least, even if you're still worried about investing in a rough economy, you should take advantage of what your employer will match in a 401k. The amount a company will match varies by company, but the range is usually around 3-6%.
You may be scared to start investing during a rough economy, but think of it this way. If the economy doesn't change within the next 5 years, you've lost 5 years where you could have been saving towards your retirement. Even if you choose low-risk investments, you will still be ahead. Don't wait for the economy to change to start savings towards your retirement.