Warren Buffet has said "put 10% of your cash in short-term government bonds and 90% in very low- cost S&P 500 index fund". He thinks the long- term results of such a plan will be better [meaning make more money] then investments in pension funds, or other investments.
First of all, what is an index fund? An index fund is a kind of mutual fund grouping where your money gets pooled together with others and invested in certain stocks and bonds.
Buffet suggests the S&P 500 index that tracks the stock of 500 large cap companies. S&P stands for Standard and Poor. The S&P 500 had an average 10-year annual return of 13.9% as if Jan 7, 2022.
You can't invest in the S&P 500, but you can copy its performance by buying stocks that are on the S&P 500 index
Government bonds offer safety with low interest rates while index funds offer a chance to grow your investment.
Critics of Buffet's plan say it is too risky for those close to retirement. It is suggested we need to have a balance of stocks and bonds, with other investments such as mutual funds or pension funds.
To view the Warren Buffet plan, go to WB Retirement Plan.
Other retirement gurus suggest that you take all your monthly expenses, multiply by 3 and have this amount in ready cash. Let's say this amount is $3K. Multiply by 3 and that's $9K.
After you have done that, take the next $9K and invest in very safe stocks that yield 2-5% annually. The next $9K in stocks that have a record of paying 4-8%, and so on. Don't get into the riskier stuff till you have secured several levels in bonds, or low paying, but solid performing stocks.
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