Resources

The Risks You Do Take Are Manageable

The good news is, even if you have to take some short-term risks you'd rather not, you can take the edge off in a number of ways. Diversification among asset classes may reduce marketwide or so-called systematic risk. In 2008, the bond market held up just fine even though stocks uniformly fell on their face. Holding assets…

There is no question that risk carries a negative connotation for investors. But the simple fact about risk is that it’s ever-present. There is more to risk than market volatility, and trying to avoid risk is like trying to avoid the oxygen in the room. You might think you're avoiding it by sticking with safer investments, such as bonds. But when you make moves like this, you're usually just…

Investors with cash holdings want to invest them in something safe that will earn at least a little interest. Money markets and short-term bond funds are good places to start. Money markets come in two flavors: money-market accounts offered by banks and money-market funds offered by mutual fund companies. Bank money-market accounts are typically protected by the Federal Deposit Insurance…

But before you do anything, consider the following for some perspective. Let's go back in time to May 2013, when interest-rate concerns also were running high because of fears that the Fed would soon begin tapering its bond-buying stimulus program. Rates climbed throughout the summer, and for the year the Barclays Aggregate Bond Index, a proxy for the U.S. investment-grade bond market,…

Bond investors have been worried about a rise in interest rates for years now, pretty much ever since the Fed lowered rates in response to the 2008–09 financial crisis. Any rise in rates hurts the value of existing bonds (on the contrary, a drop in rates helps it), and rates have been hovering near historic lows for quite a while.

For families saving for college…

One of the key rules to bear in mind when rolling over money from a former employer's 401(k) into an IRA is the 60-day rule—that is, you have 60 days to complete the rollover. If you don't complete the rollover within that 60-day window and you're younger than 59 1/2, the amount will be treated as an early distribution and be subject to taxes and a 10% penalty. That's why it's a good idea to…

Funding an IRA may seem like a simple financial task: Pick your provider, send in your money, and choose your investments. Done.

But a look at Internal Revenue Service Publication 590, which details the ins and outs of IRAs, suggests there's more to it. There are two key IRA types (Traditional or Roth), as well as two subtypes of Traditional IRAs (deductible and nondeductible), not to…

Accumulation is a key facet of reaching your retirement goals. However, we tend to see far less about portfolio drawdown, or decumulation—the logistics of managing a portfolio from which you're simultaneously extracting living expenses during retirement. This can be even more complicated than accumulating assets.

Pitfall: One of the big mistakes of retirement distribution can be not…

Whether a target-date fund is the best choice for an investor depends on a few different factors, including the degree to which the investor wants to manage his or her own retirement portfolio. Below are some pros and cons of using target-date funds.

Pros

One-stop shopping: For an easy-to-use, all-in-one retirement savings vehicle, a good target-date fund is tough to beat. It…

The idea of contributing too much to a company retirement plan may sound strange, but it can happen, especially if an employee contributes high amounts in a short time frame, thereby hitting the annual contribution limit too early and missing out on part of the employer's 401(k) match, rather than spreading contributions out during the year.

For 2014 the annual 401(k) contribution limit…