Find the right investments in this market environment
November 22, 2013
Investor optimism is on the rise, according to a recent study from investing services company, Scottrade, Inc.
Despite market volatility, 61 percent of American investors surveyed believe the stock market will be up from the previous year. With this added confidence, a growing number — 54 percent this year as compared to 46 percent last year — of investors plan to put additional money in the stock market in the next year.
"Today, we are seeing that although investors are optimistic about the future, they are deploying more conservative strategies," said Kim Wells, Scottrade's executive director of digital product development and chief marketing officer. "Choosing the right pairing of investments is essential in this market environment."
Knowing when to invest and what to invest in remain the leading challenges for investors, the survey found. Here are four areas to consider when developing an individual investment strategy.
Capitalize on market Momentum
Stocks present a flexible opportunity to capitalize on market momentum. Nearly 40 percent of investors include stocks in their portfolio, according to Scottrade's study. Brokerage firms have a variety of online stock trading tools, such as stock screeners and streaming quotes, to help investors act on rapid changes in the market.
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With securities available across a variety of sectors and industries, investors can choose holdings to match their investment strategies and risk tolerance.
Use bonds to ride the curve
Market volatility has made bonds an attractive choice as investors seek to have a stronger foothold in the market. While this investment product involves risk– including interest rate risk, liquidity risk, inflation risk, and risk of loss of principal– investors can choose from a variety of bond types such as municipal bonds, corporate bonds or treasuries to fit their individual investment strategy. With competitive interest rates and interest payments paid in regular intervals, bonds are considered less risky than stocks.
Invest for your future
The majority of investors surveyed, at 63 percent, indicated they are saving for retirement, and 401(k) and IRA investments are popular vehicles. Scottrade's research found three quarters of investors hold at least one of these. Forty-five percent of those surveyed said they believe IRAs and 401(k)s are the best tools for long-term investments. To determine a retirement savings goal, many brokerages offer interactive retirement calculators.
Save for education costs
In tandem with building a retirement nest egg, investors are often saving for a child's education. Coverdell Education Savings Accounts (ESAs) and custodial accounts provide a flexible choice for higher education expenses. Both have no minimum investment, allowing allocations to fit within a financial plan. To assist with goal-setting, college savings calculators take into account factors such as a child's age, federal and state tax rates, as well as the cost of public or private schools.
To learn more about finding opportunities in the stock market and self-directing your investments, and to find more information on the 2012 American Investor Study, visit http://www.scottrade.com.