With the recession on, there is some concern about investing — especially in the stock market. I received this question from a reader about investing:
I’m a semi-retired minister and we have a CD that will reach maturity next May 10, with about 225k to reinvest. Any suggestions?
Wow. I wish I had $225,000 to invest! That’s great that you have so much. There are a number of courses you can, depending on your needs. I am going to assume that, as someone who is semi-retired, you are interested in receiving some sort of regular income at the same time you hope your money grows. Here are three suggestions that I think might be of use to you:
- Index funds: Consider investing you money in index funds. There are many different index funds available, focusing on different segments of the financial markets. Performance is based on how the index fund does as a whole, so over time you are extremely likely to earn a return. Annualized returns over 25 years average somewhere between 7% and 9% on most index funds. If you are looking for regular monthly or quarterly income, you can choose index funds that pay dividends.
- CD ladder: Now that your single CD has matured, you can divide up your money and turn it into a CD ladder. This way, you earn varying rates of interest and different maturity times. Once you have your CD ladder set up, you have a regular process of having income as the CDs mature. You can either use the money or roll it over into a new CD to continue the ladder. (Or use part of the money and put the rest into another CD.)
- Other funds: There are many different funds available, including some funds that offer the chance of returns, as well as instant access to your money, should that become necessary. Money Market mutual funds are such accounts, as are GMNA bond funds.
You can also use some of the money to max out some tax advantaged retirement accounts. Check your eligibility ahead of time, though. Before you make a decision for sure, however, you should consult with a financial professional about the specifics of your situation. You also want to make sure you understand the tax implications of your investment decisions.
Readers: Do you have any other suggestions on long-term investments for this situation?