Best Way to Invest Money for Retirement

Generate income in your retirement years.

People are living longer than before, and the need to generate income for expenses during your retirement years is becoming mandatory. Retirement portfolios should be well-rounded and diversified to avoid unnecessary risk. However, a portfolio should contain the right investments that can generate income over the long run and allow you to live comfortably during your golden years. High-dividend investments should be at the core of a retirement portfolio. These investments can include blue-chip stocks, high-dividend exchange-traded funds and municipal bonds.

Instructions

Creating A Retirement Portfolio

1. Invest in high-quality, blue-chip stocks that offer dividends. It is very important that you focus on the long term and not day-to-day market activity. Investing for your retirement should been done sooner than later. Choose blue-chip stocks over the more risky and speculative stocks. Blue-chip stocks are large, well-established companies. These companies have low debt loads and are financially stable. Furthermore, these stocks consistently offer dividends, regardless of the economic condition. This can mean a steady flow of income. Dividend.com tracks every stock publicly traded that offers a dividend. This can help aid your search for high-yielding stocks, rounding out your portfolio. The old adage is, "buy low, sell high." A down market may be a nice time to nibble at some stock shares, but always do your research.

2. Search for dividend exchange-traded funds. These funds are comprised of numerous high-yielding investments, such as common stocks, preferred stocks, and real estate investment trusts. Exchange-traded funds allow you to buy or sell them over the stock market like a stock. Dividend exchange-traded funds pay the shareholder a higher-than-average dividend, and these funds are low-volatility. Dividend exchange-traded funds may be a core investment for income seeking investors or investors with low risk tolerance. For instance, Vanguard High Dividend Yield ETF offers a 2.6 percent yield and includes high-yielding large cap stocks. The fund's expense ratio is .20 percent. According to Vanguard, this high-yield exchange-traded fund's expense ratio is 85 percent lower than other funds with similar holdings. This dividend exchange-traded fund combines a solid yield with low cost efficiency.

3. Purchase municipal bonds. These bonds are issued by state or local governments to generate capital to pay for expenditures. The state and local government will pay bond holders an interest rate until the maturity date. These interest rates are usually higher than Treasury bonds and most corporate bonds. Furthermore, municipal bonds are considered a safe investment, because it is unlikely for the state or local government to default on the bond. Municipalbond.com is a large data base that offers a wealth of knowledge in regards to municipal bonds. You could also purchase municipal bonds through this site. A municipal bond's interest rate may be 3 to 5 percent on average. Municipal notes can be an alternative to a municipal bond. A municipal note's maturity is less than one year. Municipal bonds and notes can be tax-exempt on the local, state and federal levels.

References

• "2009 Action Plan: Keeping Your Money Safe & Sound." Suzie Orman. 2008
• "Getting Back To Even." James J. Cramer & Cliff Mason. 2009
• Municipalbonds

Resources

• Read this Article in Spanish
• Vanguard: High Dividend ETF