Investment Tweaks
There are many easy tweaks that can be made to your investments to increase cash flow. Shown are some of them. Note that each step involves greater risks but in many cases remaining steadfast can also create risks such as erosion of buying power because of inflation, having a short fall in spending or not reaching your goals by the time period you planned on.
If you have money market funds consider 1 to 1 ½ year bank CDs.
If you have 1 to 1 ½ year bank CDs consider longer term CDs or fixed annuities up to 5 years.
If you have CDs up to 5 years consider 6-to 10 year fixed annuities, or 10 to 20 year bonds.
If you have inadequate or eroding cash flow and risk falling short of your spending needs consider using 15% to 20% of your funds to buy an immediate annuity with much higher guaranteed cash flow but loss of principal; or if own a house, consider a reverse mortgage (with also a resulting loss of the home equity).
If you are not invested in stock market at all consider investing future excess interest in a major stock index fund.
If you own a large number of individual stocks consider not increasing ownership in individual stocks and investing excess dividends in a major stock index fund or funds.
If you own mutual funds measure their previous 5 year performance against their benchmarks and if they underperformed, consider investing in the benchmark index funds. Also compare your yields with that of benchmark index funds.
If you have a disproportionately large portion of your investments in stocks, consider reviewing your future cash flow needs and goals and reduce exposure if it appears you are assuming a risk greater than needed to achieve your goals.
If you are spending all your income consider reducing expenses. Evaluate future cash flow needs based on expected income and expenses and the effect of what you believe inflation will be.
If you have funds in a 401k or IRA consider investing completely in large index and stock mutual funds. I would not suggest bond funds. If you do not want to put all the funds in the stock market and can select individual bonds, consider a basket of bonds with maturities of at least 20 years. Dividends and interest should be reinvested similarly as received.
If you care or are concerned about your future financial security prepare a plan to achieve your goals. While at it, consider some tweaks to provide greater cash flow and asset growth to help you get where you want to go.
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