Certificates of deposit (CDs) are a waste of time for young investors. When I say anyone less than a couple of years from retirement, I am talking about workers who are between 20 and 40 years-old. CDs are our parents’ safety net. Most of the retirees today were not financially suave when it came to investing for their retirements. They bought CDs and government bonds. Many of today’s retirees bought bonds to help with the war effort during the 1940’s, and they never deviated from that investment strategy.
That worked for employees of that generation, but the real problem is that our grandparents have passed their conservative strategies down to our parents. And, our parents have inadvertently passed or tried to pass their outdated investment strategy down to us. But, successful investment strategies of yesteryear will not work for today’s investors. Costs of living are rising, the government will help us less in our retirement, we will live longer, and we will enjoy more things in retirement. We must invest more aggressively than with CDs and government bonds. Our generation’s new fallback position is index funds which are boring.
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