Invest in Portland

In every retirement plan, saving money is involved although only a few successfully saves enough money to fund their retirement or to invest in something that could produce a steady flow of income. A good retirement investment is something that should eat up only a small portion of your hard-earned savings and has a high return of investment.

Volunteering and starting a business are among the most popular things that retirees do. A brick and mortar business however especially for retirees is not advisable since stress in this industry is inevitable. The most suitable business for retirees is the kind where it is doable in your own home such as a home business without personal selling. No personal selling means that you do not need to sell tangible products personally (like meeting your customers and delivering the products yourself) or it would not be suitable for retirees now would it?

Most individuals do home based businesses part time and they are still earning enough money for them to consider the idea of quitting their day jobs. Since a retired person does not have a job, more time can be spent on the business. More time equals more output for the growth of the business and growth means more income. Aside from that, a home business does not require a big capital to start and if done right, it will pay for itself after a short period of time. The convenience of working from home and generating income as if you still have your job is truly a good retirement investment that can fuel your passion as a retiree.

An annuity is an investment option that offers an insurance component to individual investors. Annuity investments get their name because the investor has the ability to convert their investment into a set of periodic income payments (an annuity) either over the investor’s life or over a set number of years.

There are two main reasons for choosing annuities:
o The guaranteed income stream is important.
o Saving money over the long-term.

These two reasons are why many investors chose annuities to fund their retirements. Some investors also chose annuities to meet other long-term investment goals, such as funding educational costs for their dependents.

Annuities offer earnings that are tax-deferred. Another advantage when compared to other investment vehicles is that annuities do not have contribution or income limits. Additionally, investment swaps, within the annuity’s contract, can be made without incurring tax penalties. The insurance component of an annuity offers a premium to investors if they outlive their life expectancy.

To understand the benefits of annuity investments in more detail, it is important to understand the difference between the main types of annuities. There are three fundamental different annuity types: fixed, variable, and indexed annuities.

Fixed annuities have an interest rate that starts out as a fixed percentage. The rate can vary over time. However, the way in which the rate is change is stipulated in the initial contract. Fixed annuities also guarantee investors a certain minimum rate of interest for the annuity’s contract period. With a variable annuity, the investor uses their contributions to invest in mutual funds. The annuities payouts are then based on the mutual funds’ performance.

The final and newest type of annuity is an indexed annuity. These investments are designed to mirror the performance of a financial index, such as the S&P 500. Investors can chose how closely their annuity follows the index’s performance, by selecting a participation rate for the annuity.

Fixed annuities are considered a low-risk investment because of the fixed interest rate component of the investment. Fixed annuity investors benefit if interest rates fall, but not if they rise. Variable annuities do not offer a guarantee as with fixed annuities. However, investors in variable annuities have the ability to choose how to allocate their money amongst different mutual funds.

Finally, indexed annuities allow investors to track the performance of a financial index. The annuity will usually track the index in a bull market; however, the issuers of the annuity also guarantee a minimum annual interest rate to avoid losses when the index is in a downturn.

In summary, annuities can offer many benefits to the individual investor to meet their long-term investment needs, such as retirement planning. The basic insurance feature embedded into annuities offers a measure of protection for investors against market downturns. Returns can also grow in a tax-sheltered environment until the money is withdrawn. The three basic different types of annuities offer slightly different benefits depending on what is required and what the risk level is of the individual annuity investor.

Let’s simplify things and get back to basics. Investment is a simple process. The goal is to compound our seed capital at the highest possible level each year. The reason why compounding is the goal of every seasoned investor is because compounding makes wealth rapidly.

If you have ever played with a calculator and recognized how compounding behaves, you will know that the higher the compounder, the more skewed the returns. For example a simple bank deposit will give you a return of say 5% per year. Most investors use a bank deposit as a bench mark that they can use to compare opportunities against this base model. Each investment you make has risk and a bank deposit is the safest of all investments because it is guaranteed by the government.

For this reason it is used as a way of gaining perspective on the prospective investment opportunity. 5% is not very remarkable from a compounding point of view. Most investors use 5 and 10 year time frames. Lets look at two different compounding returns and note the difference the compounder makes.

If you started with $100 and you compounded that capital every year at 5% in 10 years you would have $162 at the end of the 10 years. But if you doubled the compounder. If you were able to find other ways to invest your money other than a bank deposit but with a reasonable risk standard, you could multiply that $100 by 10% and in 10 years you will have $259 dollars. Notice the skewed effect?

With 5% compounding you added $62 dollars in returns. With 10% or double the compounding value, you didnt make double your returns, you made more. You made $159 dollars. You made over 2 and a half times more. Interest upon interest grows money exponentially. But the real key is that extra 56%
You made 200% compounding rate (10% up from 5%), but you made 256% returns
(159/62). A whole 56% MORE than you expected doubling the compounder would give you.

The point of this is obvious. The higher your compounder is each year, the more astonishing are your results. Many investors work with the equation of risk/reward. The goal is to return as high as you possibly can each year without actually losing your investment or making a negative return. Around 30% to 50% is pushing the envelope and begins to go into the territory of very high risk investment.

However, there is a good reason why a small proportion of your portfolio should be used for high risk investments and start ups. When you play the odds, in other words you invest small parcels of money and expect to lose your small amount of money 6 out of 10 times, the other 4 will pan out for astronomical gains. Imagine paying 20 cents for Microsoft shares in the beginning. You could have bought 10,000 shares for $2000 This type of risk taking with small amounts of money is amazingly lucrative if you limit it to only a tiny percentage of your entire port folio.