Investing Money: Good Investments For the Investor Who Feels Clueless

In 2011 and into the future most folks in search of good investments will again turn to mutual funds for investing money, and for good reason. These funds do the money investing for you and try to pick good investments for their (your) portfolio. It's your money and you pick the funds, so in case you feel clueless, here we take the mystery out of investing for 2011 and beyond by getting back to basics.

In the process of investing money for the future you really only have 4 basic choices. That was true 100 years ago and still applies in 2011 and beyond. There are good safe investments that pay interest, bonds that pay more interest, stocks that grow in value most of the time; and alternative investments like gold & other commodities including real estate that offer growth opportunities sometimes when stocks don't. Those are your basic choices when investing money unless you bury the stuff, in which case inflation and decomposition can eat away at your underground deposit.

Now let's look at each of these 4 alternatives for investing money in search of good investments in mutual funds. Cash in the bank is safe and so are money market securities. These don't look like good investments now because interest rates are near all-time lows. That won't always be the case, so put some money in money market funds for safety.

Timber and Forestry Investing - Money Really Can Grow on Trees

Forestry and timber investing - the very concept seems either dull or extremely alien to most people. After all, its' much more satisfying to follow the rest of the herd and chase the latest hot social networking stock. However any investors - especially those looking for true diversification and stable returns - are making a real oversight by ignoring the value timber investments could bring to their overall portfolio. Noted stock market skeptic Jeremy Grantham of GMO Asset Management has long been a fan of timber investments (whilst being quite pessimistic about the long-term returns on offer from global equities at their current valuations), and when Mr. Grantham has an investing opinion it is well worth listening to.

There are a number of factors that make timber and forestry investments attractive:

1) First, as a "hard asset," timber investments are an excellent hedge against inflation.

2) The returns on timber investing have been quite impressive. According to the National Council of Real Estate Fiduciaries in the United States (NCREIF), timber returns since 1987 through 2010 have averaged 155 a year, whilst the main US stock index the S&P 500 has gone up only 9.1% annually. Furthermore, on average the price of harvested timber itself has gone up 5% per year over the last 100 years.

3) Timber investments also perform extremely well when stocks are in a Bear Market. For example, in 2008 when stock indexes lost as much as 40 - 50%, the NCREIF's main timber index actually went up 9.5%. As another example, during the Great Depression when stocks fell anywhere from 70 - 90%, the main US timber index went up 233%.

Why Investing Money Can Bring Long Term Gains

You don't have to look far to find the naysayers to tell you keep your money nice and safe in the bank or tucked under your mattress. Somewhere where it will for sure be when you need it. It's the truth.

There are both winners and losers in the investment game because in the broad scheme of the investment profiteering food chain. Some have to be eaten so that others may prosper.

So if you have money really the choice is yours to make. To sit on it as it is and be assured that it will be there as it is when it comes time to spend it. However, don't lose track of the fact that it will lose value in storage this way and "that", like it or not, is in fact a loss.

A loss that depending on what type of currency you keep in can be quite substantial. So now your response may be that the "banks or other similar savings options" pay interest. However, rarely does this amount of interest keep up inflation. As an example imagine someone who might have saved $100 in a bank say 40 years ago at 5% interest.

Annuities - Investing Money For and in Retirement

Investing money in annuities offers advantages over other popular investment options like bank CDs and traditional mutual funds. This is true whether you want to invest money for retirement or in retirement.

Ideal candidates for investing money in annuities would be people in their peak earnings years who want to invest money for retirement and get a tax break. Annuities are good investment options IF you plan to stay invested for at least 7 to 10 years; and you won't need this money until you are in retirement. Tax-deferred annuities have traditionally been offered in two basic forms, and are issued by life insurance companies.

Basic FIXED ANNUITIES are similar to bank CDs in that they pay investors an interest rate that is fixed for a period of time. For example, the issuer might guarantee an initial interest rate and then periodically adjust the rate over time based on the interest rate environment.

An advantage of investing money in fixed annuities is that they generally pay higher interest rates than you can get at the bank. The second advantage is tax deferral.

VARIABLE ANNUITIES in their simplest form resemble mutual fund families. They offer various investment options. Tax deferral is again an advantage here. For example, you can invest money in one of their stock funds and later switch to one of the other investment options without income tax consequences.

Tax deferral is the signature of annuities in general, and this makes them especially attractive to folks in a higher tax bracket. Here's an example of why people invest money in a tax-deferred retirement annuity (annuities).

8 Tips For Investing Money to Build Wealth

In order to build wealth, you have to make your money work for you. In other words, you need to make proper investments and earn a good return.

This is not as difficult as it seems. With all the negative press going on concerning the stock market right now, you might feel it is better to keep your money under a mattress rather than investing it. However, this is simply not true.

The stock market has provided a 10-15% rate of return over the last 80 years. Of course, this is no guarantee that it will do the same during your investment horizon. Past performance is not necessarily an indicator of the future. However, what else do we have to go on?

In order to make money with our investments, we should follow some simple tips.

I should tell you right now that I am not an investment professional of any kind. I do not profess any expertise whatsoever with investing. I am just passing along what I think is some sound advice. Invest at your own risk!

Practical tips for investing from a layman

I believe in keeping my investment strategy simple. I'll admit that seeing my net worth grow is very exciting to me, but the nuts and bolts of investing is not. If you are an investment geek, then you probably won't find much to get excited about below. However, if you are like me, you need simple, practical information to help you grow wealth for retirement. Here's what I've learned:

1. Pay off your debts before investing

I've already told you why I believe being debt-free is the path to financial success. You should pour all your financial might into becoming debt-free as soon as possible. Freedom from debt is the most important step toward building net worth. Remember, your net worth equals your assets minus your liabilities. Therefore, it makes sense to eliminate your debt before you start investing your money anywhere else.

Make Money Investing Money Conservatively

The sensible way to make money by investing money is to use a moderate to conservative investment strategy. Why did millions of Americans lose a large part of their life savings in 2008? They had an overly aggressive investment strategy. They had a large portion of their investment assets at risk in the stock market and many of them didn't even know it.

I don't care how old you are; keeping 80%, 90% or more of your investment assets in the U.S. stock market is too aggressive and too risky. Plus, it diminishes your flexibility and ability to take advantage of investment opportunities.

By early March of 2009, stocks had lost half their value in a little over a year. Had you been heavily invested in equities (stocks) throughout this period, what investment options did you have in the first half of 2009? You had two investment options, and both were negative.

First, you could sell stocks at a loss. Second, you could hold on and hope that the stock market came roaring back. Either way, you were in a losing position.

The stock market came back with a vengeance, up 50% in six months. Those who sold earlier and took big losses were not happy investors. Others who held on were still behind. If you had $10,000 in stocks and lost half you were left with $5000. Then when you gained 50%, you were only up to $7500.

A Guide to Investing Money & Money Management

Much of money management focuses on investing money to reach a financial goal. You can get low-cost investment management help and still be your own money manager. Here's your basic guide to investing and money management on a budget.

As a financial planner I worked with people who needed help with money management, acting as their personal guide to investing. The first step in the financial planning process was to establish financial goals and to get a handle on the client's financial position in terms of income, assets, liabilities and risk tolerance. Then we'd set an appointment where I would come back and make recommendations... usually in regard to investing money to reach their financial goals. In the simplest terms, I got paid if and when people decided to invest money with me. I didn't work for free; at least not most of the time.

Most people have the same primary long-term financial goal: a secure retirement. Whether you are young or older, this requires good money management and translates to investing money. If you don't want to trust and pay a financial planner you can take charge of your own money management by defining your own goals and taking an inventory of what you have to work with. Then, you'll likely need some help with the investment management end of things. This you can do the hard way like most folks do... or the easy way like I'm about to explain in this basic guide to investing.

Most people invest money in a number of places: scattered around in banks, with insurance agents, stock brokers, and other securities salesmen. They get confused and lose control over their investment management; and often pay high commissions and fees in the process. There's a better way to do this and save money at the same time. Open an account(s) with one or two no-load mutual fund companies. As a general guide to investing: there are mutual funds to fit just about any investing need. Here's how investing money in no-load funds (no sales charges or commissions) works.