Best investments for young people in 2012
|February 25, 2012||Posted by John Border under Investments, Investments in 2012|
Young people are often in the best place in terms of making investments. This is true for several reasons. Often young people are fresh out of college and in a job that earns a decent amount of money without having too many monthly bill obligations. This means that they usually have discretionary income which can be used for investing. They also have time on their side, which means that they can generally assume more risk in their investments since there is plenty of time to recover from a negative investment choice.
Low Risk Investing for Young Adults
For low-risk investing, young people can put their money in securities, such as bonds. This investment vehicle offers a better return than putting money in a saving account while offering very little in terms of financial risk. This makes it a perfect choice for young people who are experiencing trepidation when it comes to riskier investment options. With bonds, the earlier you buy, the longer you have to earn interest on the security, which makes it perfect for young people.
Real estate is another fairly safe investment vehicle for young people. However, it is also likely the most expensive investment choice that can be made. Property can be purchased purely for investment purposes with the intention of renting it out, or it can be a primary place of residence. This is a long term investment as the investor should wait for it to appreciate in value before trying to sell, which could take years.
Go for target date retirement funds
Many businesses offer a 401(K) investment option for employees. If this is available, this is a solid investment choice for young people in 2012. In fact, some companies even match a certain percentage of the employee’s contributions, which is basically free money. This investment vehicle does usually limit your investment choices, but it is a great way to invest regularly since contributions are usually taken directly out of a paycheck before taxes, which also lowers taxes paid in to the government.
Use the Roth IRA
Regardless of how young the investor might be, it is never too early to start investing for retirement. Even if contributions re regularly being made to a 401(K), it is still a good idea to invest in a Roth IRA. This enables investing in money market funds, which can offer substantial returns. The great thing about a Roth IRA is that contributions can be withdrawn at any time without any penalty fees. A penalty fee for early withdrawal is only assessed if the earnings are withdrawn. Of course, there is an exception for this. If the money is being withdrawn as a down payment for a home, and it is the first home purchase, then there is no early withdrawal penalty fee in that instance. To open a Roth IRA, minimum deposit requirements must be met. While this amount varies by brokerage company, the lowest that can be found is usually $1,000. Once the deposit amount has been met, regular contributions can be setup on an automatic contribution plan and that can be done at any amount.
Your best bet – Stocks
I think more and more young people should be asking the question that what are the best stock for young adults. That is where the money is to be made in the long run. If nothing else invest in an index fund or an ETF and make sure that you ride the index ride and create a huge corpus for your retirement.