How should I invest if I'm on a fixed income?

Nov 17, 2011, 8:27 a.m.

Deciding where to put your money can be a risky business at any point in your life. You want solid returns while protecting your principal. Thinking about ways to allot your investments to protect against market volatility and secure your retirement can be enough to send you into panic mode or put you into the paralyzing grip of fear.

However, these simple steps can mean a lifetime of enjoyment during your golden years:

The stock market

With the threat of inflation nipping at our heels, it is always a good idea to keep investing in stocks. They will help you keep pace with inflation and fight off any potential reduction in your buying power. Your portfolio should include solid growth companies that will perform over the long haul. Look for companies that pay handsome dividends by tracking their history. You may not think you can afford stocks, but the market regularly offers some real bargains.

Treasury notes

Treasury notes are a conservative investment. They can provide high-quality, short-term and long-term investments. Interest rates are not that attractive, but that is the trade-off for security. They can also be purchased relatively inexpensively. You can begin investing for as little as 100 dollars, and issue terms start at two years.

Municipal bonds

Municipal (also called muni) bonds are an excellent way to gain a stable income while avoiding taxes. Typically, muni bonds are exempt from federal and state taxes, if purchased in your resident state. Municipal bonds are offered for sale by local and state governments to finance public works projects. They are a favorite among investors that are looking for tax-exempt investments.

Before you make any investment decisions, always consult a tax professional. Also, take the time to read online and through available investment literature so you understand how these different investment vehicles work. Then, discussing your individual situation, available fixed income, and lifestyle preferences with a professional financial planner will help you make wise investment decisions.

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