Best Investments In 2013
Here are some of the best investments for 2013 especially since the world economic conditions appear to still be settling. It also seems that economic growth has apparently stopped or stagnated in both Europe and the United States. With all of the debt that is owed by the United States including trillions of dollars of unfunded social security and Medicare payments, as well as the debt crisis that is occurring in Europe, it is clear that there are some investment options that are better than others.
Best Investments In 2013: Unit Investment Trusts (UIT)
Unit investment trusts often come with little fanfare, and you won’t see them advertised as heavily as mutual funds or other investment products. The reason is that they’re generally not as profitable for the people creating and managing them. And that’s great news for investors in the know.
UITs can have either stocks or bonds as their holdings, but most unit trusts will have a deliberate focus on either capital appreciation or generating a consistent income. The key differentiating feature between mutual funds and UITs is that with unit trusts, the portfolio is established once, and remains fixed for the life of the investment. Typically no changes are made to the portfolio after the initial public offering. With debt UITs, when individual bonds mature, each investor receives his or her pro-rata share of the redeemed bond as cash. (Learn more about the basics of UITs in 20 Investments You Should Know: Unit Investment Trusts.)
While investors know exactly what they’re getting up front, unit trusts also come with a big tax advantage over mutual funds. You’re only responsible for the capital gains that you earned – you’ll never be faced with paying capital gains tax on somebody else’s money, as often happens with mutual funds. (Read more about saving on capital gains tax in Capital Gains Tax Cuts For Middle-Income Investors.)
Most UITs have good liquidity and can be traded daily at or near net asset value (NAV). They can be found at most of the major fund companies or through your broker.
Best Investments In 2013: Family
Putting money into your family might seem like a good-hearted gesture but an investment with a low monetary return. Considering the rising cost of education and childcare however; and you might want to think again. Putting money into safe investments such as bonds or savings accounts can be a great way to secure an educational future for your children. It might also be worthwhile considering the true costs of a spouse working full time. If they can work even part time from home, it might be worth leaving a low-paying job to save on the soaring costs of childcare, especially if you have more than one child that must attend daycare.
Best Investments In 2013: Individual Retirement Account (IRA)
No list would be complete without this cornerstone of the modern retirement portfolio. If you’ve been investing for many years, chances are high that you’ve already got a well-funded IRA. All of your 401(k) assets should end up in either a Traditional or Roth IRA shortly after you head out the door of your last job. And if you’re over the age of 50, you can add extra to your account over the standard annual contribution limits. IRAs eliminate capital gains taxes and can drastically reduce your future tax bills. (Compare the two main types of IRAs in Roth Or Tradition IRA…Which Is The Better Choice?)
When transferring assets in to a Roth, you’ll have to take the short-term hit by paying income taxes, but you’ll gain the huge advantage of receiving tax-free income for every penny of it down the road. When planning moves to and from IRA accounts, it is again better to either know all the rules or consult a tax pro. You may find it easier to move chunks of money over several years to spread out your tax bill. But if you hope to be drawing down on your IRA for 20 years or more, the tax savings in the future makes the Roth the best option. (Learn the requirements regarding tax and penalty fees for withdrawing funds in Tax Treatment Of Roth IRA Distributions.)
Assets in your IRA should reflect your overall asset allocation. For many people, the IRA already represents the bulk of their net worth, so proper allocation of investments is all the more important. Most standard securities like stocks, bonds and funds can be bought inside an IRA account, and the IRA itself can be maintained for minimal fees at thousands of financial institutions. Finally, IRA assets can be passed on through your estate to keep the power of compounding going for your heirs. (Read about passing on your retirement savings in Stretch Your IRA.)
Best Investments In 2013: Create an investment policy statement
Whether you do it yourself or work with a financial planner, you should have an investment policy statement that serves as a guide on how you want to invest.
This guide should include the investor’s philosophy toward investing, investment objectives, the investor’s attitude toward risk, a target asset allocation, guidelines for monitoring portfolio performance and an approach to portfolio rebalancing.
Other items should cover tax considerations, estate planning goals, fees and expenses, and trading costs. It should spell out an approved list of investments, and whether the investor allows trading on margin, short selling and investing in derivative securities. And it should also spell out whether the investor’s account allows discretionary trading by the account manager.
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