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4 ‘Back-to-School’ Items for Investors

These are four basics that every investor needs to have


I clearly recall the days of yesteryear when my then-school-aged children would open up that late August letter from their school detailing the shopping list for required classroom items. You know: rulers, notebooks, No. 2 pencils and the like.

While the out-of-pocket expense wasn’t fun, the checklist was useful in getting the kids prepared for the next few months of their life — and it’s something we in the investing world can adapt for our own purposes. So here are four things to make sure you have on your way to retirement:

  1. 401k plan: Anymore, this is a cornerstone of retirement. If your employer offers one through the company, and you’re not already enrolled, check up on all the features of the account — including matching plans — and sign up. Max out contributions if you can, and if you can’t, at least reach the company max (otherwise, you’re turning down free money). And even if you can’t meet either of those, put in whatever you can afford — the tax benefits are too good to pass up.
  2. A brokerage account: If you want to play with more than just mutual funds, you’ll need a brokerage account in addition to your 401k. It doesn’t have to be anything fancy; Fidelity, eTrade and Charles Schwab will be glad to open an account for you. That brokerage account can also do double-duty by holding your Roth or traditional IRA account, too. As long as you have earned income, you can open up an IRA. No matter which one of these flavors you choose, start funding the account as soon as possible.
  3. Income stocks: They’re better known as dividend stocks, of course, but in short, these reward investors via regular cash payouts, often quarterly but sometimes bianually or annually. For the long haul, you want to look at established companies whose products should be as in demand now as they were 40 years ago, and that will be just as relevant in another 40. That means consumer staples products makers like Clorox (CLX), Colgate-Palmolive (CL), and big energy stocks such as Chevron (CVX). But there are hundreds to choose from, so don’t stop there.
  4. Bonds: This is the other major way to get regular income. Although this segment of the investor universe is undergoing some pretty dramatic changes right now, it’s still well worthwhile to find a mix of bonds to have on our list. I’m a fan of holding individual bonds from solid AAA-rated companies like Microsoft (MSFT) or Exxon Mobil (XOM), but depending on the financial environment, bond funds work, too. In tumultuous times, short-duration bond funds like the Vanguard Short Term Bond ETF (BSV) offer some protection. If you want a touch more risk with tad more return, the iShares 7-10 Year Treasury Fund ETF (IEF) is a nice play — but as seen this year, it’s a lot more vulnerable to interest-rate hikes.

And one more item I’d like to toss in there — a calculator. I still have my trusty 1984 Hewlett-Packard 12C, though people nowadays are happy to use their smartphone or iPad.

Marc Bastow is an Assistant Editor at As of this writing he is long MSFT, JNJ, and XOM.

Article printed from InvestorPlace Media,

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