Thursday, December 27, 2007

There are so many investment choices...What should I choose?

Many new investors have a hard time deciding what they should invest in. It's a tough decision. How do people with little to no finance expertise pick stocks or mutual funds to invest in? The easy answer is to let other people do it for you. I suggest that many new investors try out Target Funds. These funds are called Target Funds because you choose the fund depending on your target retirement date. If you are planning on retiring around the year 2030, you would pick a Target Fund with the year 2030 in the title. Want to know the nice thing about Target Funds? The fund managers make all your decisions for you based on classic investing fundamentals. For example, if you pick the Fidelity Freedom 2030 fund, initially you will have a high balance of stocks and a small amount of bonds. The closer you get to the year 2030, the less stocks you will carry and the more stable investments(such as bonds) that you will have. All of the investment choices are taken care of for you by the fund managers and require no effort from you at all. They get paid to make smart decisions for you. I suggest shopping around for target funds with no fees. That way you aren't wasting your money on people managing your account. Check out these two articles talking about the good and bad of Target Funds before investing.

Target Funds Make Investing Easy

Target Funds are Simply Flawed

*By the way, I am not saying that Target Funds are the best way to invest. However, I do think they are the best way to invest for finance newbies. You can start picking and choosing other funds once you become more comfortable in wild world of finance.

No comments: