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These
are Sensible-Investor’s recommendations about specific investments
in stocks, bonds and cash. For advice on divvying up your
investments among those three categories, see Sensible-Investor’s
Step-by-Step Tuneup.
Stocks
Invest in no-load, low-expense index funds that track the broad
market. For more detailed recommendations, see Step-by-Step
Investing.
Bonds
If you’re young and just getting started with saving for
retirement, you don’t need to invest in bonds right away. But as
time passes and you approach retirement, gradually you’ll want to
put an increasing portion of your portfolio in bonds, because they
tend to buffer you against drops in the stock market. When you’re
young, those unavoidable market downturns are easy to weather by
simply outlasting them and waiting for the market to rebound.
They’re much harder to tolerate when you approach and then reach
the time when you need to start using the money you’ve invested.
The easiest and safest (though not the most rewarding) way to buy
bonds is from the U.S. Treasury. You can do this on your own through
Treasury
Direct
(with a minimum investment of $1,000).
Bond mutual funds are also simple to invest in, but are less
predictable financially than a bond you plan to hold until its
maturity date. When it comes time to sell your shares in a bond
mutual fund, you face the disadvantage of not knowing what the
shares will go for – just as with a stock mutual fund, but without
as much potential for returns.
If you want to learn more about bonds, including those with
higher returns (and higher risk) than U.S. Treasuries, the best
online investor education about bonds is provided by the Bond Market
Association’s Investing
in Bonds
site. When you move extensively into bond investing, you should
diversify in this area too. The Investing in Bonds site also covers
that topic.
For even more bond-related information, check out
InvestMove.com’s Top
10 Bond Information Sites.
For information about U.S. Savings Bonds, go to Bureau
of the Public Debt Online.
Stashing cash
For the portion of your savings and investments that you keep in
“cash” – which includes CDs and money market accounts – of
course you should get the best rate you can. Check Bankrate.com
to find the best rates currently being offered.
Before depositing your money, you’ll want to check
to make sure the bank is safe.
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