How to Avoid Risky Investments in Retirement [INFOGRAPHIC]
If you are at or near retirement, you should think very carefully about your financial future. Before committing to specific financial programs, you should be aware of the risks in the retirement investment world. Many advisors could give you wrong suggestions only because they will have a return from your choice, whether or not they will do a good job in managing your money. There are many risky options out there and you may end up losing your money and not getting anywhere. The kind of investment you should do earlier in life is totally different from the one for the retirement phase. It is especially important to focus on 3 very risky options for people near retirement, and learn about the main disadvantages.
Mutual Funds? Risky
Unpredictability at the highest level. For the average investor, mutual funds are very risky. This investment vehicle contains stocks and bonds, and your advisor may omit a few key things on their features, for example that whether or not you get a positive return you will have to pay management fees. In addition to this, you have absolutely no control over what happens with the money invested and this kind of funds are not insured. Mutual funds definitely do not represent a safe investment vehicle for people at or near retirement.
The riskiest kind of annuity
Some people say annuities are a bad choice. This is not true, because it is only one the option that really does not guarantee good results: the variable annuity. This kind of annuity is connected to the mutual fund market, so you can find the same level of unpredictability. Variable annuities will make you pay high management expenses (up to 4% every year) and other fees that can reach 7% annually. Inflation is part of the game, so take this into consideration before committing. Again, variable annuities are naturally not a good fit for retirees.
Gambling with Stocks
Buying stocks equals buying part ownership in a company. You invest your money but you actually do not know how it will be used: this little control makes it a bad choice, but it is not everything: of course, you cannot be sure the company will do well, so you may end up losing all your money.
The right kind of Investment
There is no single recipe to investment success, especially for people near the retirement age. One thing is sure: getting an education on the topic is essential. Without awareness, any kind of investment equals gambling. The best kind of investment you can do right now is in your knowledge.
Phil Cannella is the CEO of Retirement Media Inc. and the founder of First Senior Financial Group.