Here we list some of one of the best investment ideas and tackle the challenge of finding the best safe investments for 2012. What might appear to be top-of-the-line investment ideas to the uninformed could become one of many worst.
Taking a look at the massive picture for investment ideas in 2012, moderation in asset allocation and a balanced investment portfolio shall be probably the most basic key to success. There are 4 asset classes, and average investors must spread their money across not less than the first three to keep their overall portfolio risk moderate. The 4 categories in asset allocation are: safe investments, bonds, stocks and alternative investments like gold and real estate (optional). Asset allocation might be simplified, because there are mutual funds available to average investors that represent each of the 4 asset classes. Now let’s get more specific about the very best investment ideas for 2012 starting with safe investments.
Safe investments earn interest and do not fluctuate in price. You will need to look outside of mutual funds in 2012 to search out the most effective safe investments because record low interest rates have taken yields on money market securities (and hence money market funds) down to nearly zero. Among the best investment ideas if you have an account with a discount broker or major mutual fund company is to buy for one-year CDs paying higher rates if you can’t get competitive rates out of your local bank. Don’t tie your money up for longer periods just to earn just a little more interest. One in every of today interest rates will go back up and you will be locked in at a lower rate and face penalty charges should you cash in early.
Finding the perfect safe investments will probably be truly challenging in 2012, but here are some more investment ideas. If you’re in a retirement plan like a 401k that has a set or stable account option don’t overlook it. You can often get a much higher interest rate there (maybe 4% to 5%) than anywhere else outside of your retirement plan. For those who own an older retirement annuity or universal life insurance policy, it might need a hard and fast account you may add money to that is guaranteed to never pay lower than 3% or 4%. Remember, truly safe investments like U.S. Treasury bills and bank money market and savings accounts are paying WAY Lower than 1%!
Over the past 30 years bonds and bond funds have become a favorite with investors because they have been consistent performers and returned on average about 10% per year… basically about equal to what stocks have returned, but with considerably less risk. Many investors have fallen in love with their bonds funds and consider them to be among the world’s best safe investments. Bond funds are not safe investments. They have performed well since 1981 (when interest rates and inflation were at record highs) for one primary reason. Both inflation and interest rates have been falling for 30 years, which has sent bond prices higher. Loading up on bond funds now will not be among the best investment ideas for 2012. In reality, it is one of the worst investment ideas.
When interest rates and/or inflation turn around and head upward bond funds, especially people who hold long-term bond issues, will likely be losers. That’s how bonds work. One among the perfect investment ideas for 2012 is to sell your long-term bond funds if you happen to own any, and switch to funds holding bonds with average maturities of about five years. These are called intermediate-term bond funds; and average investors should have some money invested here as part of their asset allocation strategy to add balance to their investment portfolio. These should not truly safe investments, but they’re much safer than long-term funds.
My best investment ideas within the stock department focus on stock funds. Do not go heavily into the more aggressive funds that invest primarily in growth and/or small company stocks. These pay little if anything in dividend income and tend to be more risky and volatile than the average stock fund. Go with funds that invest in top quality large-company stocks with excellent dividend paying histories. Search for funds which can be paying 2% or more in dividends. Among the finest investment ideas for 2012 and beyond: put money into no-load funds with low yearly expenses. No-load means no sales charges, and low expenses mean higher net returns to the investor.
Alternative investments include the likes of real estate, gold and other precious metals, natural resources, commodities, foreign investments and so on. One of the best investment ideas for managing a truly balanced investment portfolio is to incorporate this fourth asset class as well. The simplest way for the typical investor so as to add these alternatives to their portfolio is with mutual funds focusing on these areas or sectors. My best investment ideas here: don’t go heavily into anyone area, and do not chase after a sector (like gold) simply because it’s hot. Real estate and natural resources funds could be my picks as two of the best investment ideas in the choice investments asset class.
Moderation and diversification across the asset classes will be the key to asset allocation in 2012. I have also listed some specific best investment ideas for keeping the average investor in the game and out of serious trouble should the investment scene turn ugly. Above all else memorize this: long-term bond funds usually are not among the best safe investments for 2012. They are not safe investments, period.