He remembers getting interest rates of 10% and more in the early 1980's, but not so these days. Now he can shop all week and can't get 3% without tying his money up for 3 to 5 years. Jack needs to put his money to work, but with a mentality of SAFETY FIRST he is not comfortable with his situation.
Jack could be your next-door neighbor, or maybe he reminds you of yourself. Sooner or later it's decision time. It's not a matter of should you invest ... but rather WHEN you should spread your wings and get started. Face it, earning 3% a year is a losing proposition when inflation has averaged 3% over the years. After paying income taxes on your interest, you're losing money.
When to invest is not a matter of waiting for the green light that signifies "it's safe to go now". If you wait for a well-defined or guaranteed "GO" signal, you'll run out of gas sitting at the traffic signal.
No matter when you invest, investment risk and uncertainty abound. The key is to always stay invested, but to keep yourself in a position you can live with in terms of risk. In other words, Jack can put his money to work and make higher returns as a conservative investor vs. being just a "saver".
The best time to invest is now, Jack, but first you need to honestly define your objectives. Here's a basic investor guide for those of you who can relate to Jack's discomfort.
First, ask yourself what level of investment risk you are willing to take in putting your money to work, on a scale of 1 to 10. A "1" means that you absolutely will not consider putting even a dime someplace where it is not 100% insured or guaranteed by the government.
If you are truly a "1", sell your fixed annuities and don't put too much money in any one
bank account. The government does not guarantee the safety of annuities, and places limits on how much it insures in bank accounts. Investing is not for you.
If you're safety conscious but willing to take a little investment risk with some of your money look into mutual funds. For example, balanced funds like lifecycle or target retirement funds offer very conservative investments called income retirement funds. These are designed for retired folks who want to earn more than they can at the bank without taking much risk. You don't need to be retired to invest in them.
If you're willing to take a moderate amount of risk to earn more, mutual fund companies offer balanced funds for moderate (and aggressive) investors as well.
There will never be a perfect investment, or a perfect time to invest. The answer to when to invest is NOW, and for the rest of your life if you can handle the reality of risk.
Make this commitment, then do some homework and learn how to invest.
James_Leitz
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