Your financial situation is the culmination of both your hard work and smart investment choices. Unfortunately, many people lack information and experience with making complex investment choices, and this can cause them to assume some myths about investment options are true. Dispelling the following misconceptions should help you to make sound choices when it comes to meeting your future financial needs through investments.
Myth: You Should Avoid All Risky Investment Options
There is a common idea that you should avoid making high-risk investments because this is paramount to gambling. While recklessly throwing money at high risk ventures is not a formula for success, it should be noted that there is a place for high risk and high reward investment options in almost every portfolio.
Generally, your financial advisor will recommend that you reserve a set percentage of your investment money for high-risk options. The amount of this percentage will vary greatly because the right amount for you will depend on many factors. For example, individuals that are close to retirement should keep this part of their portfolio very small because a major loss could stall retirement plans. Conversely, those that plan on working for many more years can generally tolerate more risk because they will have greater time to replace losses if they sustain them.
Myth: Government Bonds Are Always Safe Investments
In an effort to keep their money safe, some people will attempt to primarily invest in government bonds. While it is true that bonds from the Federal government are considered very safe, there are many other government bonds that can carry a substantial risk.
More precisely, bonds from struggling municipalities and counties are often considered risky investment. These government bodies are often highly reliant on the overall economy because they use sales taxes. Due to the volatility of these taxes, there is a greater chance that an economic downturn will cause the institutions to miss payments or file bankruptcy protection.
Investing in your retirement will require you to hold an extensive and diversified portfolio of investments. However, there is a strong chance that you may not be knowledge about this field or making these decisions without help may make you nervous. For these individuals, financial planning can be a stress filled nightmare, but much of this stress often comes from confusing and misleading information. By dispelling these two often believed misconceptions and getting advice from a firm like Jakob Pek Fund, you will be a smarter investor when it comes time to make a decision for your financial future.