How Should You Invest Your Retirement Accounts?

How Should You Invest Your
Retirement Accounts?
By www.ProfitableInvestingTips.com

http://profitableinvestingtips.com/profitable-investing-tips/how-should-you-invest-your-retirement-accounts
According to a recent article
in Market Watch the folks who
have buying up stocks faster
than anyone else in the last thirty
years are those making family
incomes of $42,000 a year. Why is
that?

What’s changed since 1989?
Access did.

Specifically, access to workplace
retirement savings plans, like
401(k)s, and personal investment
accounts, like IRAs.

Individual retirement plans in the
USA hold about $9 Trillion and
401(k)’s hold about $5 Trillion.

The entire US stock market has a
capitalization of about $30 Trillion.

And, since so many of us now
have these tax-deferred vehicles,
how should you invest your
retirement accounts?

Long Term and Smart
Investing for Retirement

Invest for the Long Term

The key to investing your 401(k) or
IRA is to remember that the money
will be for retirement.

By waiting until retirement to take
any money out of these vehicles,
you will likely pay less in taxes
because your income will be less
than during your working years.

And, of course, any capital gains
will be long term because many of
your investments will be ones that
you have held for years.

Use Intrinsic Value as a Guide
for Investments

Since you will be picking
investments that you may well stay
with for decades, we suggest that
you take a couple of clues from
perhaps the best long term
investor, Warren Buffett.

Buffett invests in the US stock
market because its growth is tied
to the growth of the US economy.

He only invests in stocks when he
has a clear understanding of how
they make money and how they
are likely to continue to do so for
years and years.

He was also a pupil of Benjamin
Graham, the father of value
investing and originator of the
concept of intrinsic stock value.

Thus, all of his investments are
limited to stocks with a substantial
margin of safety and the potential
for healthy long term growth.

U.S. News writes about Buffett in
an article about why Buffett is a
better investor than the rest of us.

Take Advantage of Tax-Deferral

There are companies that have
been paying dividends for decades
or ever for a century.

Many investors simply have their
dividends automatically reinvested.

But, outside of your IRA or 401(k)
you have to pay taxes on the
dividends.

But, when you buy these stocks for
your retirement accounts, those
reinvested dividends are not taxed
until you withdraw from the
account.

The Street lists 16 stocks that
have been paying
steadily increasing dividends for
50 years.

Coca Cola
Johnson & Johnson
Colgate-Palmolive
Procter & Gamble
3M
Lowe’s
Genuine Parts Company
Dover Corporation

Emerson Electric
Parker Hannifin
American States Water Company
Cincinnati Financial
Lancaster Colony
Nordson Corporation
Northwest Natural Gas
Vectren Corporation

How you should invest your
retirement accounts in these
stocks is to learn about the
companies that interest you.

Do they dominate a huge market
niche like Coca Cola does or are
they a somewhat protected
business like a utility with reliable
profits year after year?

Buffett has been quoted as saying
he avoids tech stocks because he
does not know what they will be
worth in five years.

But, he says that as an example
he has a pretty clear idea about
what a Snickers bar will be worth
and that people will be buying
them.

The point of looking at this list of
dividend stocks is that it tells you
the company has been successful
over the long term, which probably
indicates they will remain
successful during the years that
you own their stock.

How Should You Invest
Your Retirement
Accounts: Diversification

We all wish that we had purchased
a few shares of Microsoft when it
went public back in the 1980s.

The stock today is hundreds of
times more valuable, taking stock
splits into consideration and the
dividend is many times the original
value of the stock.

If you had just purchased reliable
dividend stocks back thirty years
ago, you would have missed out
on Microsoft.

The fact of the matter is that
nobody, including Buffett, is perfect
at picking investments or timing
the market.

That is why smart investors
diversify their investment
portfolios.

Investopedia writes about
the importance of
diversification.

Diversification is a technique that
reduces risk by allocating
investments among various
financial instruments, industries,
and other categories.

It aims to maximize return by
investing in different areas that
would each react differently to the
same event.

Most investment professionals
agree that, although it does not
guarantee against loss,
diversification is the most
important component of reaching
long-range financial goals while
minimizing risk.

The aim is to invest in various
assets so that they will not all be
affected the same way by market
events.

In general, investors think about
interest rates, the economy, and
the like when diversifying.

However, this approach
guarantees that you will miss out
on the next Microsoft!

Somewhere among the many
biotech startups there are a couple
of companies who ideas and
products will change the world.

Today there are already treatments
for cancer that were not even
though of just a few years ago.

When the cures for diabetes,
Alzheimer’s, and other devastating
diseases come down the pike,
those who invested early will do
very well.

Picking the right stock is difficult,
but there are index funds that
allow investors to put a few dollars
into sectors that may pay off a
thousand fold due to the
accelerating advance of science.

The point of diversification is to
reduce your risk from any specific
investment and open opportunities
for a big winner from an
unexpected source.

How you should invest your
retirement accounts is to follow the
advice of pros like Buffett, stay in
the market for the long term, learn
and apply the concept of intrinsic
value, and diversify.

How Should You Invest Your Retirement Accounts?

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