When it comes to protecting your money, you should always think safety first. Here’s how to start: First work off of the Rule Of 100. For example, if you are 65, divide your age by 100, (65/100=65%). This means that you should have at least 65% of your portfolio invested in a safe place, where you won’t lose it.

Second, ask yourself, If I lost 20% to 40% of my financial portfolio today, would that change my quality of life during retirement? Or, If you are retired today, and you lost 20% to 40% of your portfolio, would you have to go back to work? If the answer to either one of these questions is yes, consider using the Rule Of 100 to protect  your nest egg.

Have A Balanced Portfolio

If you have part of your money invested in a safe place where you wont incur losses, what do you do with the rest? There are three common places where people invest their money. These are definitely not all of your options. This short lesson will help you understand how each area works. The first place is the bank. You definitely need a percentage of your money that is liquid, and this is where banks come into play. The nice thing about banks is that they are safe. The bad thing about the banks is their low rate of return. Banks are a great investment option when you need access to cash. Consider how much you should have in the bank, so that you can earn an interest rate that at least keeps up with inflation.

The second place is the stock market. Remember that you should only have money in the stock market that you are willing to lose. You can earn big financial gains in the stock market. There are many techniques to mitigate your risk, but you can also incur big losses. Consider that the older you get, the more money you should have in low-risk investments.  Approach the stock market with caution in your later years.

The third place is an annuity. An annuity may be a good option for a portion of your safe money. Some annuities include premium bonuses that you receive on your deposit. These bonuses can range from 3% to 20% depending on how the bonus works. Be sure you understand the terms of how you will receive the bonus. Sometimes, with the higher percentage bonuses, the insurance company may require you to take your money out as income, instead of a lump sum. Also, you will have to leave your money in the annuity for a period of time. This can range from three to ten years. If you take your money out early, you are required to pay a penalty. An annuity is only for safe long-term investments.

Consult an Expert

No matter where you invest your money, you definitely want to consult a local expert to help you with your financial decisions. You need to ask plenty of questions about the products that the experts recommend before you decide to purchase one or more of them. As you can see, no matter where you have your money, there are good points and bad points with each option. The idea is to have money in all three areas, so that you keep more than you lose. The best financial professionals will help you understand all areas of your finances, and a true professional will spend quality time with you, so that you understand all aspects of your investment portfolio.

Jay J. Peak, President

Peak Financial Corporation