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What's your investment glide path?

Jan 16, 2012, 8:33 a.m.

A common retirement investment strategy involves choosing a target date for retirement and gearing all investments to work around that date. When the investor is younger, riskier and potentially more profitable, investments are chosen. As you get older, funds are moved into less volatile investments. While no investment is foolproof and guaranteed to bring in a large return, keeping your investment plan in line with a proper glide strategy can help insure that the money you put away for retirement is there when you need it.

It is recommended that, as people begin investing for retirement as young workers, they invest mostly in stocks. The reason for this is that stocks typically have a higher yield than other investments, but also tend to be more volatile. Investing in stocks early means that investors have time to ride out the rough times while, hopefully, earning significant amounts in the good years.

As someone gets closer to retirement, the more money should be in stable investments such as CDs, Treasury Notes and US Savings Bonds. These investments offer a greater degree of security. US Savings Bonds are guaranteed by the federal government. However, their yield is significantly lower than other types of investments, and often does not even keep up with inflation.

Investors can allocate their investments on their own according to their own research. You can also invest in what are known as target date funds. These funds allow you to put your investing on autopilot, and the investment mix is shifted for you as you get closer to your target date. The investment strategies that work best for you will depend on how involved you like to be in your finances, and makes you most comfortable.

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