Most people opt for traditional retirement plans but supposing someone wants to try something different which won't be too risky, what kind of investment would be best to place your retirement funds that would [probably] earn better ROI? I know all investments can be risky but is there something that would guarantee good returns?
Anything that is "guaranteed" either by a government, municipality, institution, or whatever is going to pay limited returns. FDIC-insured deposit accounts generally pay the least, especially these days. Credit unions are generally a little better. US treasury instruments pay more, but aren't paying a huge amount of interest these days either. Municipal bonds are usually tax-free, and tend to pay a little more than US treasuries. Corporate and emerging markets debt can vary widely from time to time and from issuer to issuer over time, but generally pay the most as far as "guaranteeing" a certain fixed amount at regular intervals and a return of principal at maturity. They also generally carry the highest risk of default. If you are fairly young, I'd suggest you consider forgetting about a "guarantee", and focus more on a longterm goal of hopefully having a certain amount of money at a certain time, given a certain amount you have now, and a certain monthly or yearly contribution you're willing and able to make consistently. This strategy will mean that you should focus more on stocks than bonds / debt. There are other investments / asset classes that can be considered as part of a balanced longterm portfolio - commodities, real estate, bonds, etc. But I'd consider stocks or at least mutual funds heavy into stocks as a big part of such a plan. For example, a 25 year old with $5k to invest in a Roth IRA who can contribute $5k to it each year (about $100 a week) can expect tax-free appreciation of approximately $2.5 million over 40 years if he manages to duplicate the 10% the S&P has averaged over the last 50 years. But there is always short term risk - the value of the account will fluctuate from month to month and year to year. And there is always risk of permanent investment loss, which is greatly reduced by diversifying - not too much of any one stock, bond, or fund in one's portfolio.
Such a thing as low risk and high profit doesn't exist. If you are in the USA then municipal bonds are a pretty good way to go since they are often tax free. If you are outside, then some reliable government debt... or bonds of financially strong corporations... those are basically risk free. But as always, the returns are very low. Something like a S&P 500 ETF would have higher expected returns while still being a pretty safe bet in the long run.
Guarantee returns? From a historical point of view, and index fund would probably be the best idea, but not in a bull market. It depends, I guess. If you have a large amount of money that you would like to invest, I'd invest them in bond funds until the market drops and then go all in in an index fund. However, in my country at least, this plan wouldn't be appliable, because our economy is sh**ty. I'd prefer to buy assets, preferably rental properties.
In my former company which is a savings bank has a product where you will deposit a regular amount every quarter (3 months) that would double your investment in 10 years time and more if you will not withdraw the money after 10 years. The investment package is a minimum of 2,000 pesos every quarter that is quite high for us but we were willing to invest in such for the purpose of our retirement. Unfortunately, that program was scrapped and later on the bank closed shop and sold to another bank that is bigger.
That sounds like a company that takes care of its employees as long as you are with the company long enough to reap the benefits. It promotes benefits to the employees with more money eventually, and the company keeps their employees longer thus they are not having to spend a lot of dollars training new employees.
With that scheme of savings, it was like having your own pension plan of sorts. But unfortunately something went wrong with the bank and it closed shop. But the investment was returned to the investor since it is covered by deposit insurance. Right now I am on the lookout for such trust plan of banks because I am nearing retirement age and I only have 7 years of working and a time for investing money. When I retire then there's no more opportunity to earn.
Think of it as Dials. The more you sacrifice, the more potential upside. There is no better ROI without giving something more up, generally speaking. There are some exceptions, such as getting the same basic fund over another fund but with lower fees, therefore lowering your risk, technically. But as far as general investment types go, it's all about risk tolerance and time frame. You have to decide what you want to give up: You can risk principle more You can be less diversified You can be locked out of your money longer You can take on more difficulty in selling You can get less favorable tax treament The list goes on. I recommend asset allocation based upon time frame. Do some reading on that. Here is an example of stock allocation, with the remaining dollars being in bonds and cash. The longer the time frame the more could be in bonds and not cash. 0-3 years: 0% stocks 4 years: 10% stocks 5 years: 20% stocks 6 years: 30% stocks 7 years: 40% stocks 8 years: 50% stocks 9 years: 60% stocks 10 years: 70% stocks 11-14 years: 80% stocks 15-19 years: 90% stocks 20+ years: 100% stocks
