Expert: Paul Henneman - 10/28/2010

Question
Hello,

I am 49 years old.  Way back after I graduated college, I read all kinds of articles on how great
mutual funds are, that in the long term with regular investing you would become wealthy by the
time you are ready to retire.  So I did so with fervor.  
Instead, I haven't made diddly squat over all that time.  After all these years, I don't think I have
much more than what I put in.  It’s been extremely discouraging.  
Currently I have about $120K in these types of funds, about half in IRAs, half not.  Some in
mutual funds like Fidelity Growth Co., S&P 500, and some in Fidelity Cash Reserves.  
While the stock market is doing better lately, I don't trust it.  Is there anything worth investing in
in the long haul anymore, or should I just start stuffing it in the mattress?  

Jeff

Answer
Jeff,
  Thank you for your question.
Yes, you are right and in the same situation as most investors in the US.  We have been in a very unique circumstance, where stocks and mutual fund returns on average have been flat over the past decade or more.  It is rare that such a time happens in this country.
  I would suggest looking into bonds. You can provide yourself with the more safe returns of bonds through mutual funds, or ETF's (exchange traded funds).  Bonds pay out a dividend, so generally produce returns even when the stock market is down.  They are considered in general terms a safer, and more consistent investment than stocks.
  You should stick to the big bond funds, and investment grade bonds. Junk bonds, or lower rated bonds, do offer significantly higher returns, but also are much more volatile.  If you are looking for something more stable, top rated investment bonds would be the way to go.

I hope this helps, and gives you a direction to look into. You should fully research this yourself to make sure it is for you, there are many good introductory books on Amazon.com about investing in bonds. I don't recommend investing in individual bonds, that takes too much research and time to be practical, and exposes you to the performance of too few investments. But Bond mutual funds or ETF's do make sense.  Spread it out across a few funds: perhaps some that are general US bond index funds, and some international bond funds.

Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com