Asked by Brett Lyle  |  Submitted September 16, 2014

I'm a full-time freelancer. My budget only allows me to save $200/month for retirement. What kind of funds will serve me best long term?

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  Answers  |  4

September 16, 2014

Brett, the key to your answer is in your question, "long term". Any investment or savings decision should be weighed against your particular risk tolerance. In very general terms your choices are Safety, Income and Growth. As a guideline, consider allocating the portion to growth using this formula: 100 - your age = the % you should allocate to growth. Next look at the taxation, Pre-tax vs. After-tax. At $200/month you can use an IRA and compound the growth pre-tax. Last look at the performance and fees you are paying. Consider index funds, ETFs, Mutual Funds or Unit Investment Trusts to start with.

$commenter.renderDisplayableName() | 05.26.17 @ 23:12

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September 18, 2014

Hi Brett, if "for the long term" means 10 years or longer, then you should consider a higher allocation to stocks for your retirement savings. As long as you can handle the ups and downs of the market without panicking you should be ok. In addition, make sure your portfolio of mostly stocks is diversified into US and International stocks as well as stocks of various size and valuation: large, mid and small cap and growth and value stocks. For example, the S&P 500 (large cap stocks) has returned 8.25% annualized over the last 10 years; US small cap stocks have returned 10.76% annualized over 10 years and International stocks have return 7.6% over the same time period. As far as how to invest in stocks, the lowest cost option is index ETF's or Mutual Funds. Some funds, referred to as Life Strategy or Lifestyle funds will be diversifed for you and rebalance every year.
A google search should find you some good results.

$commenter.renderDisplayableName() | 05.26.17 @ 23:12

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September 18, 2014

Use a SEP-IRA to maximize your tax savings. Invest in Exchange-Traded Funds (ETFs) and leave them alone. Good luck!

$commenter.renderDisplayableName() | 05.26.17 @ 23:12

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April 10, 2016

Hi Bret,

There are various answers to long term. On taxes, you can defer them with retirement plans. Keep in mind that you still pay the taxes when you withdraw the funds. Let's keep this simple by you understanding what long term means for you.
Now, using your understanding let's dig deeper into where to put your money so it works just as hard for you as you have for it.

As an Investment Manager (IM) I love value, meaning I leverage my understanding of an investment to receive a great ROI in value. It is less important whether to know 10 businesses or 10 thousand. Stick with what you know and understand. At the Olympics, if you run the hundred meters well, you don’t have to do the shot-put.

We use a concentrated portfolio. We hear a lot of noise about diversification. Well, if Michael Jordan is on your team and he is scoring all the points. Should you penalize him by diversifying your strategy more?

Always do what is in your best interest. Contact us directly to discuss your situation in greater detail. No obligation. We also offer educational seminars designed to get you where you need to be financially and keep you there.

It's not what you make, It's what you keep that determines your lifestyle.

$commenter.renderDisplayableName() | 05.26.17 @ 23:12

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