When the investment market is on the up-and-up, everyone is interested in getting their piece of the pie. But during a recession, people tend to pull their funds to secure accounts or they simply stop investing altogether. And if you’re looking at starting some sort of investment plan, you may be reticent to do so when the media is full of horror stories about people who lost everything. And if you ever met someone who lived through the Great Depression, you are probably familiar with the money-in-the-mattress method of saving. But if you’re not investing your earnings, you might as well shove them under your bed, because your money could be working for you if you just knew what to do with it. So here are a few ways to start investing for your future now, despite the fact that the economy is still mired in recession.
1. 401K. Almost all employers now offer the opportunity to take some of your pre-tax dollars and put them into a retirement plan. This is an easy way to save for your golden years for a number of reasons. First, you can’t touch the money until you reach the age of retirement (well, you can, but you’ll pay a lot of fees, so it isn’t really worthwhile). Second, it comes right out of your check so that you really don’t even notice it’s gone. Third, it’s pre-taxable income, meaning you’re earning more in the long run. And finally, your employer may offer a matching program that allows you to virtually double your contribution (further increasing your earnings).
2. Roth IRA. This type of account is one that you pay into on your own, but it provides an excellent supplement to a 401K. It also shares several features with a 401K in that it is virtually untouchable until you retire and you can use it as pre-tax income by deducting it when you do your yearly taxes. Plus, you have some options for disbursement, making it easy to get what you need to live on once you retire.
3. CDs. With several different types of certificates of deposit to choose from, you can decide how long you want money to sit (anywhere from six months to five years). Although a CD is a one-time investment (you can’t add money intermittently), you can purchase as many as you want so that they mature in sequence over time. They won’t earn a lot for you (only about 3-4%), but it’s more than double what you’d earn in interest on a savings account.
4. Stocks and bonds. The trick with starting any portfolio is to make sure you have a wide variety of investments so that you can keep it going if one area begins to fail. By putting money into stocks, bonds, and mutual funds (with varying levels of risk), your potential to earn is almost unlimited. Of course, you could lose money here and there, but if you’re in it for the long haul, you’re probably going to come out ahead.
5. Real estate. With so many homes being foreclosed and the market still tanking, you stand to show a significant turnaround by investing in properties. However, don’t go in thinking you’ll be able to flip. You need to be prepared to hang onto a property (and pay the mortgage) at least until the market begins to rebound (so you can turn a profit), which by all accounts could be several years.
Lisa Ryan writes for AdvanceMe, the nation’s leading merchant cash advance provider and credit card factoring company.
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