Good investments for young people 2012
| January 31, 2012 | Posted by John Border under Investments in 2012, Retirement Planning |
Target retirement funds are good investment choices for young people in 2012. In fact, the 2012 Money magazine ‘Money 70’ list of the best investments for 2012 includes two different target retirement funds. This type of fund is a good choice because there are different funds for each targeted retirement year. Since young people can take on more high risk investments without too much harm, the target retirement funds for young people tend to be more heavily invested in stocks than the target retirement funds for older people.
The Vanguard Target Retirement Fund is one of the two such funds mentioned by Money magazine in their 2012 ‘Money 70’ list of the best investments for the year. For young people between the ages of 18 and 23, which would put retirement in about 45 years, the best fund is the Vanguard Target Retirement 2055 Fund. This fund trades under the symbol VFFVX. This fund can actually be used as a good investment vehicle for people looking to retire between 2053 and 2057. This fund is investing 90 percent in global stocks and 10 percent in corporate bonds and US Treasury bonds. The way that this fund works is that the percentage of stocks begins to get reduced annually, as a means to lower risk, and the percentage of bonds is increased starting in 2031. Since inception, the return on this fund is 8.91 percent. The minimum required initial investment is $1,000 and the expense ratio is 0.19 percent.
The T. Rowe Price Retirement Fund is the other target retirement fund mentioned in the Money magazine in their 2012 ‘Money 70’ list of the best investments for the year. For young people between the ages of 18 and 23, the best fund is the T. Rowe Price Retirement 2055 Fund. You can find this fund under the trading symbol TRRNX. This fund is investing 90 percent in domestic, international and inflation-focused stocks and 10 percent in domestic bonds and international high yield bonds. The way that this fund works is that the percentage of stocks begins to get reduced annually, as a means to lower risk, and the percentage of bonds is increased starting in 2031. Since inception, the return on this fund is 0.41 percent. The minimum required initial investment is $2,500 and the expense ratio is 0.76 percent.
For young people who are slightly older, there is a different target retirement fund from Vanguard and T. Rowe Price. For young people between the ages of 24 and 28, the proper target retirement fund is the year 2050 fund. This fund is actually invested the same way with 90 percent stocks and 10 percent bonds. However, the allocation change begins earlier with this target retirement fund since there is less time for risky growth before retirement age. In fact, the stock holdings for this target retirement fund begins to change annually with the start of 2026. This target date fund is best for young people with an expected retirement year between 2048 and 2052.
