Money & Investing - Banks.com

One of the issues that comes up in terms of retirement planning is how much money you need in investments to live comfortable off the interest — or at least live comfortably while the principal remains mostly intact throughout the rest of your life. Often, multiple “passive” income streams are needed in order to achieve this goal. At the very least, a balanced portfolio can help you get a good mix of less risky and risky investments to maximize your earnings while preserving more of your principal.

My Money Blog offers an interesting look at some different investing strategies for your investment portfolio that can help you earn passive income for retirement:

Bonds and CDs

These are considered the least risky of investments. Consequently, they also have the lowest returns. Government bonds (both federal Treasury bonds and municipal bonds) can offer reasonable yields, however, and CD laddering can be one way to get regular income from cash investments.

60/40 allocation

This is an investment strategy that combines riskier stocks (60% of your investment portfolio) with less risky bonds (the other 40%). According to theory, this will allow you the ability to withdraw 4% of your investment portfolio every year. This will only marginally reduce your principal, as the returns should be high enough most years to cover most of the withdrawal. However, there is a warning:

However, your portfolio will experience wilder swings, and this rigid method is very sensitive to the returns in the first years of retirement. If you have a bad decade upfront, your chance of going broke rises quickly.

Mutual funds

There are mutual funds out there designed to help you attain regular income. They include some stocks, but focus a great deal on bonds as well. The idea is to create an income stream.

In a related category, there are managed payout mutual funds that adjust their allocation depending on how you are spending your money.

Stock dividends

Dividend paying stocks can also be helpful. These are stocks that regularly pay out per share. In some cases, yields are high enough that you can live off the dividends. However, in times like these dividends decrease, so becoming dependent on them can be risky in and of itself.

Income annuity

This is a very interesting income stream. However, it is likely that you will lose your principal. But if you are more interested in a regular monthly income, this might work out for you. Here is what My Money Blog says about the income annuity:

With a simple version of an immediate annuity, you hand over a lump-sum upfront in return for fixed income payments for life. Of course, if you die early then you don’t get your lump sum back. However, you could live until 110. It’s almost like life insurance in reverse. A special risk here is that your insurance company must stay solvent the entire time, so you must check credit ratings.

Whatever you choose — or if you go with a combination — it is important to make sure that you are doing the right thing for you and your situation. And remember to start saving and investing for retirement right now: You can’t live off your investment portfolio in retirement if you don’t have one.

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 investing, mutual funds, investing blog, retirement planning,
passive income, investments, income annuity

In these economic times, charities are feeling the results of donors holding back as they try to shore up their own financial situations. As a result, there are some new ideas of how consumers and others can donate to worthy causes without spending very much extra money. Now the idea is moving into investing with Davlin Philanthropic Funds.

Mutual fund sends fees to charities

According to the Davlin Philanthropic Funds Web site, investors still get the benefit of an investment that offers returns (a commitment to a charity of 30, 40 or 50 years is required), while the charities receive “The bulk of the annual fees that normally get paid to the mutual fund management company.”

A press release from Davlin explains how this works:

For legal and operational reasons, the donations from the mutual fund will go to the Davlin Foundation, a 501(c)3 non-profit foundation. The foundation will, in turn, distribute these donations to charitable organizations with guidance from the individual investors.

I find this an intriguing idea. Mutual funds are generally less risky than many other investments. However, if Davlin invests only in sustainable companies, those might be a little more risky. But the idea is a good one. Helping charities through normal fees you expect from a mutual fund (the fund offered by Davlin is no-load), while allowing you to garner returns.

Sustainable investing and finances is a concept that is gaining ground because it allows many people to benefit. The idea is that there is no reason that one person’s gain is another person’s loss. Sustainable investing says that everyone can gain. We’ll have to watch Davlin Philanthropic Funds to see whether this is an idea that is — in fact — sustainable.

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.

Tags: investing idea, Davlin Philanthropic Funds, investing blog, sustainable investing,
economy, investments, mutual funds

One of the fears I hear regularly is that with stock market volatility — and other upheavals in the investing world — that investing is “too risky” or “not smart” right now.

It is true that some types of investing may not be the best idea right now, especially for beginners. But investing is still a smart choice. It is important to use investments to allow the law of compounding interest to work in your favor. You just have to be careful about what you invest in.

Stocks

If you choose carefully, picking fundamentally sound value stocks, you can actually find some great bargains right now. Buying more while the market is mostly down on most days can mean great gains down the road. Index funds are another way to get into stock investing without exposing yourself to excessive risk (although that risk will always be there). Mutual funds can also offer stock investing diversity with lower risk than individual equities (but watch out for the associated fees).

Bonds

These are considered “safe” investments — when they are government bonds. Federal bonds regularly grow, albeit at a rather stodgy rate. However, they can make good investments in terms of safety, and they generally do better as the economy falters. For better returns (but greater risk) corporate bonds and municipal bonds can be invested in.

Currencies, Commodities and Futures

Currencies are rather risky. When you get involved with FX trading, you should have a high risk tolerance. It is possible to make quite a lot of money on the currency market, but it requires some practice and the ability to take chances with your cash.

Commodities and futures are also quite risky. These require knowledge of markets and savvy decision making. Any number of factors can affect how commodities and futures move, and it is important to know what you are doing and to have a high risk tolerance when you engage in commodities and futures trading.

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.

Tags: stock market, currency market, investing blog, index funds,
futures trading, investments, FX trading