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Many investing professionals will tell you that a good strategy — especially for the beginning investor — is choosing index funds. This is because index funds offer consistent returns, and they are relatively safe (although, of course, all investment carries the risk of loss).

What are index funds?

Index funds are instruments that include stocks from an entire index. You can buy funds for the S&P 500 index, Nasdaq and Dow Jones All-Shares. There are index funds that allow you to invest in foreign companies, small businesses and other sectors. The idea is that you can gain when overall market performance heads higher. And, with the stock market in turmoil right now, it is possible to get shares in index funds for reasonably low prices, helping to boost your earnings later.

Things to watch carefully when choosing index funds

It’s not about just choosing a managed index fund and going with it, though. You need to choose carefully, or fees and other costs will eat into your earnings. The Motley Fool offers some insight into choosing index funds:

The various funds also differ in their minimum investment amounts, and those with higher minimums tend to have lower fees. Schwab offers one such fund with an expense ratio of 0.52% and a minimum of $100, and another fund with an expense ratio of 0.37%, along with a minimum of $50,000. Fidelity Spartan’s expense ratio is a mere 0.09%, but its minimum is $100,000. Look beyond the single expense-ratio number, too, as some funds charge sales loads and account maintenance fees, escalating the costs further.

You want to make sure that you truly are getting the best deal on your index funds, and you want to make sure that you are making solid decisions that are likely to benefit you in the long run.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: stock market, index funds, investing blog, choosing index funds,
investing strategy, investments, foreign funds

U.S. stocks are somewhat mixed this morning, with some sectors gaining and others falling a bit. In general, though, even the news that higher oil prices are being seen had small effect on stock index futures — although that could change.

One of the main worries right now is that there could be more bad news. Every time there has been some optimism on the stock market recently, things have turned around and become worse. Bloomberg reports on some of the fears regarding U.S. economic data:

“My concern is that we still have not yet seen all of the bad news come to the table,” James Bevan, who helps oversee about $10 billion as London-based chief investment officer at CCLA Investment Management, said in an interview with Bloomberg Television. “I’d be much happier attempting to buy the S&P 500 at 1,150,” or about 10 percent lower than yesterday’s closing price, he said.

Predicting the stock market

Predicting the stock market is actually rather difficult. It is a volatile market (although not as volatile as some), and it can change direction unexpectedly. And, while it is possible to pick out trends in the direction of stocks and other investments, one never knows when that trend will change. This is why “timing the market” rarely works.

For most people, the best investing strategy is to buy when there is a dip and try to sell when there is a bounce. For those who are not concerned with being active traders, the “buy and hold” strategy is one that is often used. Since the stock market generally gains over time, having solid stocks that are likely to have steady gains over several years are considered relatively safe bets — although even the best plans can go awry and the best companies fail.

In the end, it is important to note that no one really knows where U.S. stocks are headed — especially in the near future. The best you can do is, well, the best you can do.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: stock market, stock market news, investing blog, U.S. stocks,
economy, investments, investing strategy

One of the cornerstones of retirement planning is investing. Indeed, it is important to have a good investment portfolio if you are planning on retiring well. This investment portfolio can include a number of investments, including stocks, bonds, mutual funds and other items. And one of the popular additions for retirement planning has been the variable annuity.

Right now, though, the variable annuity has been taking a hit. With interest rates low, they aren’t paying as much. Well, the old-fashioned variety of annuity isn’t. But there are newer variable annuity choices that include such benefits as:

• Wide investment options.
• Guaranteed lifetime withdrawal.
• Better death benefits.
• Bonuses for premiums that you make.
• Lower expenses associated with the variable annuity.

If you have a variable annuity, consider upgrading it rather than getting rid of it. If you simple turn it in for the cash, you will have to pay income tax, possibly a surrender fee and even a penalty if you are younger than 59 1/2 years old. This could completely destroy any sort of value that you would get from cashing it in.

Instead of cashing in your variable annuity, think about the 1035 Exchange. This is a law that allows you to upgrade your annuity, without penalties. Here is what Investopedia explains about the 1035 Exchange:

Under Internal Revenue Code Section 1035, the IRS will let you exchange one annuity for another one, income-tax free. The catch is that the funds must pass directly from the old annuity contract to the new annuity contract. In other words, you cannot accept a check for the old annuity to buy the new one.

You’ll also have to keep the owner and annuitant on the new contract the same as under the old contract, although you can change these once the exchange is complete. In addition, there is no limit on the number of old variable annuity contracts you exchange for new contracts.

Shop around at different companies for a variable annuity that best works for you. Then, instead of getting rid of your old one, make a change for the better.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: retirement planning, variable annuity, investing blog, investment portfolio,
IRS, investments, 1035 Exchange