Investment Articles

If you are an average investor and want to invest money in an alternative investment like gold, silver or real estate don’t invest until you know the best investment form to invest in. Where you invest is crucial in 2011, 2012 and beyond because these alternative investments have become volatile. If the markets go against you you’ll want to be able to liquidate your investment quickly and easily.

A few years ago investing money in real estate, precious metals or other commodities was out of the question for most folks. These are called alternative investments, and there were two roadblocks if the average person wanted to invest money there. First, it was complicated and risky to play the commodities markets (and still is). Second, liquidity can be a major issue if you take ownership in the physical form. Have you ever tried to sell a property or silver coins in a hurry? Simply put, it can’t be done at a fair price. That’s called poor liquidity.

In 2011, 2012 and beyond you can invest money in these areas with excellent liquidity and simplicity. Your best investment alternative: exchange traded funds (ETFs). Let me use silver in 2011 as an example. If you held silver coins (rounds) going into 2009 or 2010, you watched prices soar through early 2011. It was probably the best investment around until May of 2011. As silver approached $50 an ounce it got hit hard and the price fell fast. If you wanted to take profits (liquidate) on your silver coins there was no quick and easy way to do it, so you probably did nothing.

Nobody knows where to invest money at all times to earn the best returns in terms of precious metals vs. stocks and bonds vs. real estate. But there is a best way for average investors to go about investing money in all of the above. In our silver example, an exchange traded fund with stock symbol (SLV) was probably your best investment. It is a fund that tracks the price of silver and trades as a stock. If you want to buy or sell you can do it any time (at market price) the stock market is open… on the internet… for a commission of about $10. That’s called liquidity, and all you need is an account with a major discount broker to play the game.

With exchange traded funds you can trade the markets, or you can invest money for the long term by putting together your own best investment portfolio that is both diversified and balanced. These funds offer average investors a broad spectrum of choices for 2011, 2012 and beyond. You are missing out on opportunity if you are only investing money in stock funds and bond funds. Put some alternative investments in your portfolio as well. The answer to where to invest in them: exchange traded funds.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Whether investing money to the tune of $1000, $10,000 or much more, there are basic investing mistakes that most beginners make. These mistakes can be very costly, so let’s look at investing $10,000 and how beginners can do things right.

When investing money, beginners must realize that there is no such thing as a perfect investment. You can’t have it all in any one single investment. If you are investing $10,000 you must have your own personal financial objectives in mind. What are your priorities from this list: high liquidity, safety, growth, higher income, tax advantages? Be honest with yourself and your financial planner if you have one. Investing money is all about tradeoffs, and what level of risk you are willing to accept.

Of all the investing mistakes beginners make, not knowing and sticking with your financial objectives is the worst. If you are investing $10,000, do you need instant access to your money (high liquidity) in case you have a financial emergency? If so you need a safe investment like a money market fund; and you give up growth, higher income and tax advantages. Otherwise you could be faced with fees and penalties, or market losses if you need to cash in at the wrong time. For example, you don’t want to be forced to liquidate a $10,000 stock investment that’s fallen to $5000 just to make your mortgage payments.

Once you have your objectives in mind get a handle on the investment options that fit your needs before you start investing money. For example, if you are working for a living and investing for retirement, you need at tax break and should consider an IRA or your 401k plan at work if you have access to one. If you are investing $10,000 a year you might want to put half in such a plan and the other half someplace you can get to it without penalties. Lack of liquidity one of the most common investing mistakes beginners make.

Avoid excessive costs and fees. Investing money in stock funds and bond funds to get growth and income not need cost you an arm and a leg. Investing $10,000 in the wrong mutual funds could cost you $500 off the top when you invest and as much as $200 or more EACH YEAR for expenses and other fees. This is one of those investing mistakes beginners make that can be costly over time. For example, people invest in bonds to earn higher income, and over the long term bonds and bond funds have returned about 6% a year. You can’t afford to give a third or half of that back in charges and fees. Go with no-load index funds. There are no sales charges to invest, and investing $10,000 can cost less than $50 a year, period.

Investing money successfully need not be a part time job, but it does require a little ongoing effort on the investor’s part. Ignoring the status of their investments is a common investing mistake beginners and many other investors make. Look at your quarterly statements when you get them. Are there charges and fees you don’t understand… are you losing money? You can not correct a problem if you don’t know it exists.

You can avoid the common investing mistakes beginners make and put yourself in a better financial position. Know your financial objectives and get a handle on your investment options. Keep your cost of investing low and stay on top of your investments. Once you have cash reserves set aside for liquidity, you can start investing money one step ahead of the crowd.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Investing money in 2011 and 2012 puts the investor between a rock and a hard place as investing has become more difficult. Investing in stocks has gained favor vs. bonds in recent months. What’s going on, how should you invest, and why do I say investing has become difficult?

The stock market just about doubled in value between early 2009 and early 2011, and investing money in stocks (equities) and selling bonds appeared to be the new trend in investing for 2011. Does this mean that investors are confident that the U.S. economy is well and getting better? Not necessarily. More than likely it means that investing in equities appears to be the lesser of two evils. Bonds and bond funds have a cloud hanging over their head. Interest rates could start rising significantly in 2011 or in 2012 and this spells trouble for anyone investing in bonds.

There are very few statements you can make in the world of investing money that are universally accepted as fact. One of them is this: when interest rates go up, bond prices (values) go down. In simple terms, the fixed interest payments that these securities pay become less attractive to investors as rates go up. So, many investors will sell their bonds… sending prices down… and put their money someplace else. Since the government had been holding interest rates down for months to stimulate the economy, rates are likely to go up in 2011 or 2012, if the government stops this policy as planned. Investing money in bonds will then be a loosing proposition if rates rise significantly. That’s a fact and about as black and white as investing gets.

Stock investing is more of a gray area. High and rising interest rates can slash corporate profits and this tends to send stock prices down. But in early 2011 rates might have been rising, but they certainly were not high by historical standards. Corporate profits were strong and investors dumped bonds and switched to stocks. The other major alternative for investing money was safe investments like one-year CDs and money market funds. With both of them paying less than 1% a year, there was little reason for the average investor to invest in either. The only real advantage in safe investments at these low interest rates is safety and liquidity.

In other words, none of the three basic investment areas where most people invest look very attractive. That’s what makes investing money in 2011 and going forward difficult. If interest rates continue to climb bonds are guaranteed losers and stocks will eventually get hit. Safe investments might not look attractive when they start paying at 1% or 2%, but they will at 3%, and that’s where folks will put there money.

So, how should most people invest money for 2011-2012? Cut your exposure to bonds and avoid long-term bonds and funds that invest in them. Long-term bonds and funds will get hurt the most if rates rise significantly. Go with intermediate or shorter term bond funds. Move some money into money market funds. They are safe and the interest they earn will automatically go up with rising interest rates. Investing money in stocks or equity funds should remain a part of your overall strategy, but avoid aggressive growth issues or growth funds that don’t pay significant dividends. Look for dividend yields of at least 2% in high quality stocks or equity funds. Growth stocks are often hardest hit when corporate profits fall.

Diversification and balance are your keys to success when investing money in 2011-2012. There are times you can invest aggressively, and there are times when a more cautious approach is called for. With interest rate hikes looming over the markets, this is not the time to throw caution to the wind. 

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

If you are not sure how to invest money and want to invest to get ahead, don’t start investing until you know some rules of the road. Few things are black and white in the investing world, but you can avoid major mistakes when you invest by following some simple guidelines.

Get the idea out of your head that investing money and outperforming the markets is easy. Few professional investors have consistently done this in the past 10 years; and 2011, 2012, and 2020 will likely be no different. Your objective when you invest should be to earn better than average returns with only moderate risk. To do this you’ll need to invest in stocks, bonds, and perhaps real estate.

Forget about picking your own stocks to invest in unless you intend to make stock picking a part time job. One poor pick can ruin your year. You can’t afford to NOT make money when the stock market has a GOOD year, which is most often the case. Diversification is the key to investing money and participating in the stock market over the long term. The same is true when you invest in bonds. Few average investors can analyze individual bond issues, so they are best off investing in a diversified portfolio of bonds.

Real estate still looked dead in early 2011, but don’t believe that it will never again be a good place to invest money. In the future it is quite likely that 2011 or 2012 will define the bottom in this troubled market, even if (when) inflation and interest rates heat up. When that happens, investing money will be a real challenge for anyone trying to find the single best place to invest. Don’t spend your time or money trying to out-guess the markets and other investors. Instead, put together a diversified and balanced investment portfolio.

How can a beginner invest in stocks, bonds and real estate and at the same time have some money safely tucked away earning interest? You can do this by investing money in just three different mutual funds. Let the professionals pick the stocks and bonds for you by investing in a traditional balanced fund, where about 60% goes to stocks with most of the rest going into bonds. That simple formula has worked for years, so invest most (about 70%) of your investment portfolio there. The other 30% divide equally with half going into a real estate equity fund, and the other half going to a money market fund for safety.

Don’t get distracted when investing money and don’t try to time the markets. Real estate will again come back into favor and interest rates will likely rise in 2011 and/or 2012. When rates go up returns on money market funds will get better. When real estate recovers, you’ll be there. When you invest money in a balanced fund you’ve got stocks and bonds covered. If you invest by the simple guidelines provided here you should be better able to relax. You’ve covered the bases and avoided making major mistakes.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Whether the year is 2011, 2012 or 2020 – here’s a good investment strategy to make money investing without a crystal ball. Any good investment plan considers both investment selection and timing. If you can’t make money investing with this simple strategy, rest assured that only the few and the lucky will make money.

Before you stress over putting together a good investment strategy for 2011 and going forward, ask yourself the obvious question. Where do most successful people invest (or where have they in the past) to make money investing over the long term? The answer before the financial crisis was bonds, stocks and real estate. The answer today for the average investor is the same and takes the simple form of bond funds, stock funds and equity real estate funds. In the final analysis, if all three of these investment areas tank – we’re likely in a depression and only a lucky few folks or smart speculators will make money investing.

Good investment strategy does not rely on speculation or trying to time the markets. No matter what you hear, no one has a proven and consistent record in market timing that beats the markets significantly over the long term. If they did they’d make a ton of money investing, and they’d hide their secrets, not share them. So, why not settle for a good investment strategy that makes only one major assumption: that the USA will grow and prosper over the long term?

Investing money in the three areas above is simple with mutual funds. To lower your risk and add flexibility to your investment strategy, add a fourth fund type called a money market fund. At today’s interest rates these might not look like a good investment, but they are safe and earn interest that tracks current rates. Getting more specific, by owning just 4 different funds you can put together a good investment strategy for 2011 and beyond and make money by investing in America’s future. In order from high safety to higher risk and greater profit potential: a money market, intermediate-term bond, large-cap equity-income, and equity real estate fund is all you need to own.

A good investment strategy to get your feet wet is to simply invest equal money in all 4 funds. Timing strategy requires no judgment calls or guessing. One year later and once a year after that, you simply move money around to make all 4 funds equal in value again. This automatically forces you to take some money off the table from your better-performing funds – and to move more money into those that didn’t do as well. The net result over time is that you are buying more shares when prices are down, are selling shares that are relatively expensive.

This is also a good way to make money investing over the long term while keeping a lid on risk. Simply buying and holding funds is not a good investment strategy, and has gotten many average investors in trouble in the past. For example, real estate funds were good investments for multiple years until they were nailed by the financial crisis. Had you owned them and just held on, by 2009 you could have had a significant amount of money accumulated and at risk there… resulting in big losses as a result of the financial crisis.

There’s more than just simplicity involved in what I am calling a good investment strategy for 2011 and well beyond. This strategy employs two of the only time-tested tools in the investment business: BALANCE & REBALANCE and DOLLAR COST AVERAGING. The first tool keeps you on track while keeping a lid on risk, and the second is the tool that works to lower your average cost of investing by having you buy more shares when prices are lower and fewer when they are high.

You can put a good investment strategy together with only moderate risk by owning just 4 different mutual funds. People make money investing over the long term with bonds, stocks and real estate; and the smart ones keep some money in a safe investment as well for flexibility. In years past, some folks simply got lucky and made money investing without a strategy. With a good investment strategy you won’t need to cross your fingers and rely on luck. If America prospers in 2011 and beyond – so should you.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Again in 2011 the best investment for most people will be mutual funds, but the best investment strategy might differ from last year. In today’s investment world there are few bargains out there. If you want to go with a simple conservative strategy – here it is.

There are three basic investment choices in terms of both risk and profit potential: LOW, MEDIUM, and HIGHER. From left to right this translates to money market securities, bonds, and stocks. Mutual funds are your best investment vehicle because they are designed for and managed for the average investor; and they come in all three of the above varieties. This means that you can put together a simple version of the best investment portfolio for 2011 by owning just three different funds.

As the year 2011 unfolds: low risk investments pay low interest rates, bonds are expensive, and stocks are not cheap. With few bargains out there your best investment strategy is to play it conservative, keep it simple and cover all three bases with mutual funds. This way you have diversification within all three funds and across all three levels in terms of risk and profit potential. Now let’s look at the best investment in all three areas or fund categories, and then move on to a simple strategy for 2011.

If you are investing in a 401-k or other retirement plan, your best low-risk investment is likely a STABLE or fixed account option if one is offered. These often pay interest rates higher than you can get outside of a retirement plan. Otherwise, go with a taxable money market fund unless you are in a higher tax bracket. Consider a tax-exempt money fund if you are not in a tax-favored account (like an IRA) and are in a higher tax bracket. If interest rates go up significantly in 2011 money market funds might be the best funds in your investment strategy.

The best investment strategy in the medium-risk area is to go with an INTERMEDIATE-TERM bond fund. Look for a fund that holds high quality bonds, but not the highest quality. The latter hold lots of U.S. government securities, which pay less in interest income than comparable corporate bonds. Higher income without excessive risk is what you want from a bond fund. Avoid long-term funds because they can be risky and will get hit for big losses if interest rates soar in 2011. Intermediate-term bond funds are your best investment in terms of risk vs. profitability.

In the higher risk, higher profit potential area your best investment is an EQUITY-INCOME stock fund that invests in large-company dividend paying stocks. Look for names you recognize like GE, IMB, and Exxon in a fund’s list of their top holdings. An S&P 500 index fund can be your very best investment option because these funds hold stock in 500 of America’s largest and best companies.

Your best simple conservative investment strategy for 2011: keep equal amounts of money in each of the three funds recommended above. KEEP is the important point and the key to long-term success beyond 2011. The best investment strategy as years go by: once a year move money around to keep all three funds equal in value. In this way risk will remain moderate and you’ll stay on track with a relatively conservative investment portfolio.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

How to invest money in 2011 depends on whether there is a bond bubble and whether or not the bubble bursts or at least deflates. First we’ll explain a bond bubble and how it will affect bond funds. Then, we get down to how to invest in funds just in case the worst happens in 2011 or 2012.

It’s harder for most people to understand a bond bubble than it is to understand a stock bubble like we had in the year 2000. That’s because most folks don’t understand the securities involved – let alone know how to invest money in them directly. Hence, people rely on bond funds that own these debt securities in their portfolio to do the management for them. Stocks and bonds are both securities that trade in the open market once they are issued to the public, and the price of both fluctuates. The same is true of the price or value of funds that invest in either of these securities. In 2011, it’s time to think twice before you invest money, or if you have money invested in bond funds.

A bond bubble refers to extremely high prices in the market for longer-term debt securities called bonds, and this is a result of interest rates falling to extreme lows. Because rates have fallen for so long and have fallen so far leading up to 2011, prices have gone way up. This is because these securities pay what looks like a high interest income that is fixed and never changes. All of these securities also have a fixed date when they mature, which means the owner is paid back the principal borrowed by the bond issuer, which is usually $1000. In simple terms, you don’t need to be concerned with the details if you invest money in bond funds because the fund deals with the details. You just need to know how to invest and where to invest money in these funds.

When any financial bubble deflates, prices fall. When a bubble bursts, prices fall severally. Memorize these two rules on how to invest in bond funds, just in case there is a bond bubble. First, if interest rates go up prices will fall. Second, long-term funds will get hit hardest, intermediate-terms funds will fall less, and short-term funds will be much less affected. Long-term funds pay considerably higher interest income, but in 2011 they carry much more risk.

Short-term bond funds hold issues that mature is just a few years. Hence the fund won’t get stuck holding them for long if interest rates soar. On the other hand, long-term funds hold issues that mature in 20 years or so. If rates soar, they have two negative choices: sell at a loss or hold on and hope things turn around. If investors panic and cash in their funds, the fund company must start selling bonds in their portfolio to raise cash to pay folks back. As selling intensifies, prices tumble even more. That’s the worst scenario: the bond bubble bursting. So, the question is how to invest your money in bond funds in 2011 without too much risk?

Invest your money in funds with AVERAGE MATURITIES in their portfolio of 7 years or less. These will be labeled as intermediate-term and short-term funds. If you have money in long-term funds, switch it over. If you have new money to invest, avoid long-term funds. If there is a bond bubble and it does deflate or burst, you can put money into longer-term bond funds later when prices are down. Until then, how to invest your money amounts to: better safe than sorry in 2011.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

You can make some wrong decisions in 2011-2012 and still make money investing if you are investing money with a handle on asset allocation. If the worst happens few people can really expect to make money investing, but YOU could with good asset allocation working for you. What’s the worst that could happen?

Investing money in stocks returned about 15% in 2010, bonds earned less than half of that and safe investments paid zip – while investing in gold was worth 30%, silver 84%, oil 15%, with real estate a mixed bag. In 2009, oil was the big winner, having been the big loser in 2008, when gold was on top. Investing money for 2011 and beyond need not be a guessing game. Your best odds to make money investing without speculating is called asset allocation: spreading your money across the various asset classes. By far the simplest way for the average investor to do this is by owning a variety of mutual funds.

Mutual funds exist for investing money in all of the above asset classes and they are designed for average people. Fund management selects the stocks, bonds and other investments and they manage them as a diversified portfolio for their investors as a group. Some funds specialize in areas like real estate and precious metals (like gold and silver). Your job is to do the asset allocation: tell the fund company how much money to invest in which funds. If you spread your money out across the asset classes and you don’t make money investing in 2011, you likely won’t know anyone else who did make money.

I personally divide all investments into just 4 asset classes to keep asset allocation simple. In order from safest to higher risk: safe interest-paying investments, bonds, stocks, and other alternatives like real estate, gold and natural resources like oil. In mutual funds, that translates (in the same risk order as above) to money market, bond, diversified stock, and sector (specialty) funds like real estate, precious metals, and energy or natural resources funds. In large fund families like Vanguard and Fidelity investing money in all of the above can be done by opening just one mutual fund account.

How you do your asset allocation when investing money in funds will depend on the level of risk you are willing to take. But keep in mind that you also lower your overall risk just by diversifying across the 4 asset classes. The asset classes and funds above are basically in order from safest to riskiest, so take that into account in your asset allocation for 2011 and beyond. If you want more safety go heavier in money market funds and shorter-term and intermediate-term bond funds. For more profit potential and risk go heavier into diversified stock funds and spread a lesser amount of money around in real estate, natural resources, energy, and perhaps gold or precious metals funds for 2011-2012.

Over the years investors have made money investing, earned higher than average returns, and lowered their overall risk by diversifying across the asset classes… as losses in one area were often more than offset by gains in another. In the years leading up to 2011, most of the asset classes have tended to move together, which is unusual. Extremely low interest rates, high government debt, and a recent financial crisis with lingering high unemployment have blurred the lines and created much uncertainty. The worst that can happen ranges from instability in interest rates or deflation/inflation, to another financial crisis. In any such case, it will be extremely difficult to make money investing without some sort of strategy in place.

Investing money in 2011 and beyond will involve uncertainty, and asset allocation is your best strategy for hanging in there and avoiding excess risk. Until it’s possible to make money investing in safer investments, you’ve got to spread it around. There are basically only 4 general asset classes. Investing money in mutual funds is the easiest way to cover all the bases.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com.

Yesterday’s best investment portfolio might not be the best investment strategy for most folks in 2011 and beyond. For the past decade bond funds were the best investment vs. stock funds. Going forward your portfolio might need a few adjustments to keep you out of trouble.

For many years mutual funds have been the average investor’s best investment vehicle, and a simple portfolio formula has worked quite well. Diversifying with a bit over 50% in diversified stock funds and 40% or so in bond funds has worked to keep the average investment portfolio out of serious trouble leading up to 2011. But this might not be your best investment portfolio going forward. In the past decade diversified stock funds have struggled while bond funds were steady performers. As a result investors large and small have loaded up on bonds and the funds that invest in them. Before 2011 turns to 2012 a change of fortune could be in the cards.

Investment trends leading into 2011 included higher prices for stocks, oil, gas, gold, silver and other commodities. And late in 2011 longer-term interest rates headed upward, which sent bond prices down. If such trends continue and inflation heats up, the best investment portfolio going forward will NOT be one that’s heavy into bond funds (also called income funds). Simply put, when inflation and interest rates heat up bond funds lose value. Your best investment strategy here is to cut back on these funds if you have significant exposure. Favor short-term and intermediate bond funds and sell or avoid long-term funds. The latter can get hit hard when interest rates and inflation go up.

In the stock (equity) fund arena, broaden your horizons. Most people rely heavily on general diversified stock funds that invest primarily in domestic (U.S.) stocks. Your best investment strategy here is to include international funds in your portfolio for world-wide diversification. Then consider non-diversified specialty funds that specialize by holding stocks in these sectors: energy or natural resources like oil… real estate… basic materials like copper and aluminum. Although gold funds have been one of the best investment options going into 2011 – if you missed gold’s big move don’t chase gold at $1400 an ounce or more.

The best investment portfolio for 2011 and beyond will also include the only funds that are really safe investments: money market funds. These pay interest in the form of dividends with a share price pegged at $1. If interest rates and inflation go up these funds should hold their value AND pay increasingly higher dividend yields. Money funds, unlike bond funds, benefit when interest rates rise.

Keep in mind that interest rates and inflation had been low and/or falling for many years heading into 2011. This has kept bond prices rising, because the FIXED interest income bonds pay has looked increasing attractive to investors. That’s the real reason millions of investors still see bond funds as their best investment. If trends reverse your best investment portfolio will be one that’s conservative in the bond funds department… more broadly diversified in stock funds… with money market funds for safety.

What if you make these changes to your investment portfolio and trends don’t change? You’ll still have a broadly diversified portfolio for 2011 and beyond that’s balanced across the asset classes. And your best investment portfolio over the long term is always one that is well diversified and balanced.

Author and former financial planner James Leitz brings 40 years of investing experience to readers in his complete investing guide for beginners, INVEST INFORMED. Learn how to invest starting with investment basics in plain simple English. To get up to speed on both investments and investing money for 2011 and beyond visit Jim at http://www.investinformed.com now.

It’s time to decide where to invest money and where not to invest for 2011 and beyond. The flow of money and the investment tide could be changing, so you’ll want to invest money with your eyes wide open going forward. Here we look at safe investments, stock funds vs. bond funds and gold.

What does the flow of money and a changing tide have to do with where to invest in 2011 or 2012? Where money flows in – prices rise. Where it exits from prices fall. In recent years gold has soared to all time highs. In the stock funds vs. bond funds arena investors have flooded bond funds with money inflows of hundreds of billions of dollars as bond prices climbed. Stock funds watched money run for the exits. There had been a rising tide in gold and bond fund prices as 2011 approached the scene. This will change if investors decide to invest their money elsewhere.

WHERE TO INVEST MONEY IN SAFE INVESTMENTS: Safe investments pay interest, and very little of it these days. If you see a higher interest rate on what appears to be a bank CD, look twice before you invest money. Make sure it is federally insured by the government because there are misleading imitations out there. If you have money in a retirement plan at work or with a life insurance company, check to see if they offer a fixed or stable account option. These safe investments often pay the best rate around. Do not invest money in the average bond fund if you need high safety. For 2011 and 2012, these are not necessarily safe investments. Go with safe money market funds instead.

WHERE TO INVEST MONEY TO EARN MORE INTEREST: For almost 30 years as INTEREST RATES FELL, bond funds were the place millions of average investors put their money to earn higher interest income, with relative safety. With interest rates near record lows the risk of owning these funds now somewhat offsets the potential rewards. Rule #1 in regard to bond funds: when interest rates go up, fund prices (values) fall. Rule #2: long-term fund prices fall the most. Do not invest money in long-term funds unless you are willing to bet that interest rates will fall further in 2011-2012. Instead, go with a mix of short-term and intermediate-term funds.

WHERE TO INVEST MONEY FOR GROWTH AND INCOME: In the stock funds vs. bond funds debate for 2011, stock funds are the favorite in the growth department. Bond funds are not growth investments. Frankly, I’d shy away from stock funds that invest your money in growth and smaller-company stocks that pay little or no income in the form of dividends. Instead go with general diversified stock funds that invest in large-cap company stocks that pay good dividends. It will be nice to have some dividend income in case the tide for stocks goes out. Consider putting some money in real estate stock funds for income and to add even more diversification to your portfolio.

In 2011 and 2012 the issue of where to invest money will likely focus on stock funds vs. bond funds. Gold is bound to be in the headlines as well. At over $1300 an ounce, gold has become a speculation. If you invest in gold keep one eye on the exits. The average investor needs to invest with a long-term strategy that includes both stock funds and bond funds. Go for dividends in the stock category and avoid long-term in the bond department. Invest money like the investment tide was ready to turn, because it could in 2011 if INTEREST RATES RISE.

Author and former financial planner James Leitz brings 40 years of investing experience to readers in his complete investing guide for beginners, INVEST INFORMED. Learn how to invest starting with investment basics in plain simple English. To get up to speed on both investments and investing money for 2011 and beyond visit Jim at http://www.investinformed.com now.