Tips On The Safest Ways To Save Money
BOSTON (CBS) - The stock market is soaring, and interest rates for savings accounts are low. It can be tough today to figure out the best investment strategy.
When stocks crashed in 2008, investors frantically fled stocks and put their money in bonds. $589 billion has flowed into bond funds since March 2009. Today, they hold roughly $2.6 trillion.
Now, many of these bondholders are reeling because bonds, which many consider a safe investment, are losing value.
WBZ-TV's Paula Ebben reports.
Ray Martin of CBS Money Watch said, "Bonds and bond funds can fluctuate in value, particularly when interest rates are rising. And when interest rates rise quickly, bonds can lose value quickly, and catch investors off guard."
Gold has been luring frustrated investors as alternative. It's often seen as a so-called "Safe Haven" during tough times.
Gold prices shot up 30-percent last year, but now this volatile investment has come down too.
So what has the lesson been these past few years?
The bottom line is no single investment is 100-percent safe, 100-percent of the time.
The key is a diversified portfolio of stocks, bonds, and cash. If your money is in different types of assets, it's more likely that market losses in one area can be offset by gains in another.
To determine the best mix, Martin said you must consider the time horizon for when you will need the money.
"The shorter your time horizon, the more cash and bonds you should have in your portfolio," he explained.
Since cash is the least volatile asset, any money you'll need in the short term should be in a boring savings account, money market, or CD.
Investments like gold can have a place in your portfolio, but its value should be limited to 5-percent of your total portfolio.
Experts say once you've determined your asset allocation, make sure you stick to it.
No investment is a sure bet, but a solid diversified plan should serve you well over the long haul.
