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Author: ProjectPat1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 265859  
Subject: just starting out Date: 1/20/2013 1:18 PM
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hi, a very newbie here, i never invested by myself before. My investments are all in real estate and i would like a more passive way to make money, but very skeptical and i don't want to lose any of my retirement money, is there any sure bet?????? i have 60,000 from selling one of my properties. thanks
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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 260362 of 265859
Subject: Re: just starting out Date: 1/20/2013 3:27 PM
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Welcome ProjectPat1. We're glad you could join us.

Sadly, avoiding risk completely is a tall order. That puts you into fixed income investments where yields are very low just now.

You can expect better returns over time in equities, and that is what Fools usually recommend to keep your retirement funds growing to keep up with inflation over time. But its important that you find investments you are comfortable with.

To minimize risk, many are investing in dividend paying stocks. The yield paid by the dividend tends to support the stock price, but as company earnings grow, many increase their dividends. Hence, your investment tends to keep up with inflation. Good quality blue chip stocks also tend to be industry leaders. They are usually fairly safe.

Some would suggest an S&P 500 Index fund such as Vanguard 500 Index Fund (ticker VFINX). The S&P 500 can be regarded as the major leagues of business. They are low cost funds, and they tend to do quite well over time. That would be a good basic investment to begin with.

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Author: globalist2013 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 260368 of 265859
Subject: Re: just starting out Date: 1/21/2013 10:54 AM
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Sadly, avoiding risk completely is a tall order. That puts you into fixed income investments where yields are very low just now.

Paul,

In order to avoid something, it first has to be defined. If by ‘risk’ the opening poster means ‘the loss of nominal-principal’, then you might be correct that his only choice is ‘fixed-income’.

However, if ‘risk’ is defined more meaningfully as ‘loss of purchasing-power’, then he has no choices anywhere within the investing world, nor within the cash-management world, because nothing he could choose lacks both the possibility of loss of nominal-principal and/or the loss of purchasing-power. Nothing. The POS derivative known as TIPS merely provides a way to short the CPI. But it does not fully protected against the loss of purchasing-power as ordinary householders experience inflation within their own lives.

There are only three betting games one can play with money: cap-appreciation, cap-preservation, and cap-conservation. If a person’s intention is to hang onto as much of his already acquired purchasing–power as possible, then ‘risk’ in the sense of ‘possible loss of nominal-principal’ has to be accepted, which is the path you do propose to him. Whether that’s the best path is a whole ‘nother matter. But with the markets (both stock and bond) at unsustainable highs (due to the Fed’s free money policies), I doubt that going long now, and at these prices, is a smart thing to do.

However, a hedging strategy might be just the ticket. Setting one up would require a bit of work, and it isn't without costs. But it's probably a better bet than the conventional solutions for surplus cash.

Charlie

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