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How Should You Invest Your Money For Retirement?

By on December 15, 2014
invest money for retirement

If you’re saving money, you need to be investing money, and there are many ways to accomplish this goal. Many people want to know the best way to invest their money, but there are many factors that must be examined first.

Age Factor

Your age has everything to do with asset allocation when investing. The age factor can actually address several different aspects of investing as it pertains to your individual efforts.

How close are you to retirement? What have you already set aside for retirement? Ultimately, retirement is your end game, which means that you need that money set aside to sustain your lifestyle after work is no longer on the table.

Risk Analysis

Age isn’t the only thing that will strictly determine your investments. Your perceived risk when investing is important as well, as no one needs to be outside his or her comfort zone.

When it comes to risk analysis, there are several tools available online to help you determine and even help you choose your investments. It’s all going to come down to percentages and diversification. Furthermore, it’s going to be intertwined with the age factors and your retirement goals as well.

For example, a person is 25 years old, graduated college a few years prior and has just landed the job to help himself start a career, a family and plan for retirement. Naturally, he’s going to be thinking about saving for retirement.

Taking this person as an example, he decides that with approximately 40 years until retirement, he can go ahead and take on a little more risk with his investments. However, this does not mean he isn’t careful, even offsetting his more risky investments with income-based investments.

For starters, he might decide that he wants the majority of his investment money put in individual securities, 60 percent being the example used here. The other 40 percent can be spread across mutual funds, bond funds, certificates of deposit, insurance investments and more.

Liquid Savings

When planning out your investments, always make sure there is an emergency fund available to you as well. This should be a liquid cash fund that you can turn to any time a cash emergency arises. This cash emergency fund should continue to grow as you plan for retirement, essentially making part of your savings always liquid, as investments are not liquid enough to depend upon for fast cash.

Furthermore, this helps you not touch your investments as they continue to grow. Naturally, this also helps you avoid selling investments at the wrong time just to make up for any cash shortage you might sustain.

Age Factor Revisited

The investment choices for a young person just now setting out and planning for retirement has been explained briefly. Now take a look at what a person might decide if he or she is 50. A 50 year old only has on average between 12 and 15 years left to work and save for his or her golden years.

Anyone at this age isn’t going to want the majority of their money tied up in risky investments. As an example, a 50 year old might allocate 30 percent of their investment money for individual stocks. The remaining 70 percent can be spread across the other investment choices mentioned earlier.

Risk Revisited

Both the 25 year old and the 50 year old still have to personally examine their own investment risk tolerance to determine their exact investment choices. For example, maybe the 25 year old wants to invest in more risky stocks or perhaps allocate more funds to individual securities in general.

Or, maybe the 25 year old would rather put less into securities but still give himself a chance to bring in those bigger rate of returns. Risk can mean a greater reward, but it can also mean a more substantial loss.


When you are diversifying your portfolio and making investment choices, it’s not just about choosing between individual securities, mutual funds, CD’s and more. For example, when choosing what stocks to invest in, you want to spread your choices across different sectors.

A good general rule of thumb when choosing investments is to choose at least five different stocks, each of them from a different sector. For example, you can spread your investments across the banking and financial sector, the food and beverage sector, the technology and electronics sector, the communications sector and the precious metals sector.


Many investors feel that commodities investing can help offset the risks that are found in people’s investment portfolios. The same thing goes for bonds helping to offset securities investments.

When the stock market is a little weaker or on a roller-coaster, both the bond market and commodities investments have traditionally been a little stronger. To make an example of this, consider the price of gold going through the roof as the stock market took its hit several years back.

After reading the basics of investing and where to put your money, you can talk to a financial adviser if you want additional guidance. He or she can steer you towards certain investment choices.

For example, perhaps you want to invest primarily in blue chip stocks when choosing your individual securities. Or, maybe you want to make sure that each stock you invest in pays dividends. Certain high-profile companies offer stock that of course is less risky than selecting penny stocks, which are classified as securities selling under five dollars a share.

Portfolio Analysis

Whether you have an investment portfolio already or are just beginning to build one, annual portfolio analysis is a must. Whether you do this on your own or have your financial adviser look things over is up to you.

One main reason for this is your investments are going to fluctuate, meaning your percentages of allocation are going to fluctuate. Another major reason is that you are going to get older, which means your risk tolerance will change over time.

Finally, don’t try and become a day trader overnight. Building wealth for retirement involves the great tried and true strategy of “buy and hold,” which is a noted strategy of the acclaimed Warren Buffet, investment guru.