3 Places to Put Money Now

Photo (cc) by greggoconnell

As I said in the video above, while certainly not out of the woods, our economy is definitely showing signs that it’s on the mend.

And that’s not just my opinion. Here’s an excerpt from the Federal Reserve’s survey of economic conditions, published last week…

Reports from the twelve Federal Reserve Districts suggest that economic activity continued to expand moderately from November through December. Conditions were said to be improving in the Boston, New York, Philadelphia, and Richmond Districts. Activity increased modestly to moderately in the Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and Dallas Districts. The economy of the Minneapolis District “continued its moderate recovery,” while that of the San Francisco District “firmed further” in the reporting period leading up to the close of 2010. Conditions were generally said to be better in Districts’ manufacturing, retail, and nonfinancial services sectors than in financial services or real estate.

So according to the Fed, our economy is improving. They also said in the same report that hiring is picking up, retailers are doing better, factories are increasing production, and the fear of a double-dip recession was decreasing among businesses. There are still some troublesome parts of our economy, however, particularly employment and housing.

If you picture our economy as a the face of a clock, with 12 marking the top and 6 the bottom, the hour hand now is probably at about 9: well-past bust and on the way, ever so slowly, to boom. Which means it’s time for some investments and time to avoid others.

Where should you put your savings now?

Before we explore the options, let’s be clear about the money we’re talking about – long-term savings that you absolutely, positively won’t be needing for at least five years. If you’ll need your money before that, you’ll need to keep it safe, which means in an insured bank account.

Also not available for investment elsewhere: money you’re putting away in your retirement plan at work. You’re getting a tax break for those contributions, and you might even be getting a match – the only truly free money you’ll ever be offered. So we never fool with that either, although we may make decisions about how to invest that money based on the economic cycle as well.

Stocks

Now that the warnings are out of the way, one proper investment for this part of the economic cycle is the stock market. Why? Because as the economy improves, companies make more money, and those increased profits typically show up as higher stock prices.

While this is a decent place in the economic cycle to consider stocks, it isn’t the perfect place. That was when the economic cycle was at it’s scariest: in 2008, at the depths of the recession. Back then, the stock market was half of what it is today.

To see what would have happened had you invested near the bottom of the economic cycle, just take a look at my personal stock portfolio.

But we can’t go back in time and buy – are stocks still a buy today? Yes. But rather than buy individual stocks like I do, you might want to go for something simpler, like Vanguard’s S&P 500 Index fund or ETF. These will give you the market’s overall return without the hassle or risk of picking individual stocks.

And remember my rule of thumb for investing in risky stuff – take your age from 100. That’s the percentage you might consider for your long-term savings. So if you’re 30, up to 70 percent. But if you’re 70 – no more than 30 percent. Because the last thing you need is to be too heavily invested, then get freaked out during a pullback – and trust me, we’ll have some.

Real estate

I’m not going to write much about why I think real estate is a good idea because I already have several times – for example, see Why You Should Buy Stocks and Houses Now. The bottom line is that because the housing market is so horrible, not enough houses are being built to satisfy the need. That could ultimately lead to a shortage, which in turn could lead to higher prices. But I’m talking years, not months.

If you’ve never owned a house, now’s a good time to take the leap – provided you have the time and money to do it right, and you live in a growing area. Ditto if you already own a house and have considered rental property.

The right investment any time

Paying down debt is a great investment in any economic environment. As I said in my news story, paying off a 15 percent debt is like earning 15 percent with no risk and tax free. My advice: a mortgage? Sure. But I’d pay off every other debt I had before I invested in any stocks, bonds, or anything else.

There you have it – three investment ideas to consider for this part of the economic cycle. But there are also investments you should avoid. I’ll talk about those in my next post.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
5 Reasons You Should Claim Social Security ASAP
5 Reasons You Should Claim Social Security ASAP

Experts often recommend postponing claiming your Social Security retirement benefits. But there are situations in which you should start taking the money sooner.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

What Brand Makes the Best Rechargeable AA Batteries?
What Brand Makes the Best Rechargeable AA Batteries?

The best battery depends on what you need it for and how big your budget is. Here’s how to find the cheapest brand that will do the job you need.

7 Effortless Ways to Make Extra Money
7 Effortless Ways to Make Extra Money

In the digital age, new ways of earning cash crop up all the time — and some require next to no effort on your part.

This Pastime Can Keep Your Brain Sharp as You Age
This Pastime Can Keep Your Brain Sharp as You Age

It’s never too late to benefit from taking up this type of activity.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

9 Shopping Mistakes to Avoid at Costco
9 Shopping Mistakes to Avoid at Costco

Are you missing out on serious savings at your favorite warehouse club?

7 Social Security Rules Everyone Should Know by Now
7 Social Security Rules Everyone Should Know by Now

Confusion over Social Security is a shame, considering how many of us will need this money badly.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

They don’t make coffee makers like this anymore.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

This Is the Most Dependable Car Brand in the U.S.
This Is the Most Dependable Car Brand in the U.S.

This brand’s vehicles are least likely to give drivers repair headaches, according to J.D. Power.

Is Writing a Check Still Safe?
Is Writing a Check Still Safe?

Every time you pay by check, you hand your bank account numbers to a stranger.

6 Ways to Protect Your Retirement Accounts From Hackers
6 Ways to Protect Your Retirement Accounts From Hackers

Imagine having $245,000 stolen from your retirement account — and not being reimbursed.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

The 6 Best Investing Apps for Beginners
The 6 Best Investing Apps for Beginners

If you’re looking to ease into investing in the coronavirus economy with just a little money, check out these easy-to-use tools.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

7 Hidden Sections of Amazon Every Shopper Should Know
7 Hidden Sections of Amazon Every Shopper Should Know

These little-known departments of Amazon are gold mines for deal-seekers and impulse shoppers alike.

The 10 Worst States for Retirees in 2021
The 10 Worst States for Retirees in 2021

Based on factors like affordability, quality of life and health care, these are not ideal places to spend retirement.

8 Ways You Are Wrecking Your Major Appliances
8 Ways You Are Wrecking Your Major Appliances

Some appliance failures are beyond our control, but plenty are self-inflicted.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.