Investment Strategies: Risk, Diversification, and Retirement Planning Save Groups

What is the relationship between risk and reward in investments?

Higher risks typically lead to higher rewards.

What does the phrase 'There's no such thing as a free lunch' imply in investing?

It suggests that guaranteed investments usually have low returns.

What are examples of low-risk investments?

Savings accounts, CDs, money market funds, treasuries, savings bonds.

What is a significant risk even for safe investments?

Inflation.

What are potential investments for short-term goals?

Savings accounts, money market funds, CDs.

What are potential investments for medium-term goals?

CDs, bond funds, savings bonds, balanced mutual funds.

What are potential investments for long-term goals?

Index funds, stocks.

What is a common trend regarding S&P 500 returns?

Most years, the stock market goes up, but there are no guarantees.

What is diversification in investing?

Using different types of investments to reduce long-term risk.

What is the easiest path to achieving diversification?

Investing in mutual funds.

What should you look for in mutual funds?

The lowest cost options, ideally with expense ratios less than 0.1%.

What are index funds known for?

Focusing on buying and holding assets with lower expense ratios and tax costs.

What do S&P 500/Total Stock Market mutual funds reflect?

The performance of the largest companies in the US.

What type of mutual fund invests in smaller companies?

Mid/Small-Cap mutual funds.

What is the focus of growth mutual funds?

Companies expected to grow quickly.

What do value mutual funds target?

Companies with lower P/E ratios, often offering good dividends.

What type of bond mutual fund invests in Treasury bonds?

US Government bond mutual funds.

What are the tax advantages of municipal bond mutual funds?

They invest in state/local bonds, offering tax benefits for some investors.

What is a junk bond?

Corporate bonds from riskier companies that offer higher returns.

What should you prioritize when investing for retirement?

Using tax-advantaged accounts like IRA or 401k.

Why is it important to find out if your employer matches 401k contributions?

To ensure you contribute enough to get the employer match.

What is the recommended asset allocation for a long time horizon in retirement?

Invest at least 80% of your accounts into stock funds.

How should bond funds be incorporated as you age?

They should become a larger part of your portfolio as you get older.