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Where to Invest Your Money in 2010

Smart investing tips for the new year and beyond.

By
Laura Adams, MBA
5-minute read
Episode #157

Avoid Common Investing Mistakes

Don’t make the mistake of thinking you should put off investing until the market “improves”. Waiting to invest can cost you in the long-run because you’ll probably miss out on the market’s best days, which can significantly lower your overall returns. A good strategy is to use an automated plan so your investments are spread out evenly over the year.

Also, never think you should wait to invest until you have more money. Even if you only have a small amount to put aside, that’s okay. Contributing just $50 a week over 25 years with a 5% return would give you over $129,000. The saying time is money is the absolute truth when it comes to building wealth for your future.

Where Should You Invest Your Money?

If you’re like me, having enough to retire is probably your number one financial priority. So here are my three recommendations for where to invest this year:

Recommendation #1: Invest in a Workplace Retirement Account

Workplace retirement accounts include plans like 401ks, 403bs, and 457s. They offer nice tax advantages and are mandatory, in my opinion, if you also get company matching. A company match is when your employer invests a certain amount of money on your behalf when you invest your own money. Always contribute enough to max out a company match so you’ll get as much free money as possible. For 2010, the contribution limit that employees can put into most workplace plans is $16,500 or $22,000 if you’re 50 or older.

Employer-sponsored plans make investing really convenient because the funds are deducted from your paycheck before you even see it. The only downside to a workplace plan is that it may not offer a huge variety of investment choices. However, if you have more than 10 years before retirement, choosing a stock fund is generally a good choice for an optimal return on your investment.

Recommendation #2: Invest in an Individual Retirement Arrangement or IRA

IRAs are the second best place to invest. They’re the answer when you don’t have a workplace retirement plan or if you max out a workplace plan and still have more money to put away. IRAs offer great tax advantages with unlimited investment options, but you can’t invest as much in them as you can with a workplace plan. The IRA contribution limit for 2010 is $5,000 or $6,000 if you’re 50 or older.

You can open an IRA at brokerage offices, banks, or many online sites like etrade.com, zecco.com, or sharebuilder.com. At ShareBuilder you’re required to set up an automatic investment plan for recurring or one-time investments. If you set up a plan with them before January 31st you get 10 free trade credits which is a $40 value.

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.