Problems investing in just a 401(k), IRA or Mutual Funds
Most Americans who have money in the market have it in the form of mutual funds in a 401(k) or an IRA. Or they've trusted a financial planner or money manager to handle their money. He then puts their money in mutual funds.
Mutual funds have some advantages, but these days, even more disadvantages. There are simply much better alternatives these days. Mutual Fund fees can not only be staggering, but despite the way they are sold, they are rarely diversified properly to help you avoid major losses when the market plummets. You may have learned this the hard way.
Most financial planners and investment advisors try to convince you that buying and holding mutual funds or stocks is a solid strategy, because historically the market goes up.
Sure, that's been true at times in the past. But this recent downturn shows that the market can, and will lose money over long stretches. We are at lower market prices today than we were ten years ago.
You can make money in the markets, and you can avoid catastrophic losses. But you can't do it by just putting money in a 401(k) or IRA and hoping the market goes up.
You have to educate yourself on some investing principles beyond the basics. It's not rocket science, but it takes time to fully understand these principles and put them into action. But with proper education you can learn to diversify your own portfolio and control risk so that you don't get slammed by the downturns that can wipe out your retirement.
The best approach will always be a long-term focus of growth building and risk control. You may also want to consider whether investing yourself is the best approach, or whether you should just learn enough to pick a good investment advisor, broker or financial planner.
Ryan_Teeples
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