Investing for the long term.

News and financial web sites are full of ideas of where you should put your investing dollars in 2014. Ditto for newspapers and television.  This stock, that stock, maybe a bond fund, or how about some gold, and surely do not forget to pick the right fund to invest in while doing so. All this is hogwash and frankly comes from reporters and 99% of the media that knows nothing, absolutely nothing, about investing.  Many of these same reporters either have some vested interest or likely sitting on a big fat pension plan at work that makes saving and investing meaningless.  Below I will give you three time tested guaranteed ways to invest for the long term, where you can put your money on autopilot and forget about it. 

The most important item on your checklist is your company 401-k plan.  If your company has a plan invest as much as they allow or at least as much as you can afford. All this money is invested from your income prior to getting taxed so you in effect get something like 20% plus in return your first year, depending on your tax rate.  The IRS limits are $17500 for those under 50 years old and $23000 for those over 50 years and up. Most companies also match an amount as well so at least go as much as the match to get the free money, so tack on 3% or more onto your first year return.  Most importantly here is to begin as early as possible since the key to investing is not the amount, but the time our money has to compound. A little money invested builds up to large amounts when it has 20 years plus to compound. One last point, there is no need to invest your money anywhere else if you have not maxed out your 401-k plan. So disregard all that other noise out there if you have not done so. 

If you have maxed your 401-k plan your next best investing vehicle is a Roth IRA.  Again your IRS limits are $5500 for those under 50 years of age and $6500 for those 50 years and over.  You likely have some choices here in where to invest a Roth IRA since it is outside your employment company retirement assets so chose Vanguard.  Vanguard is the cheapest and best place to place investing assets. They are investor owned and operate the least expensive funds period. Take advantage of their advice as well as they have no dog in the fight other than to serve clients. 

Before we move on to a couple other investment ideas for 2014 let's discuss where to place your money.  Again disregard the advertising and noise you are seeing and place your money in index funds either in your IRA or 401-k.  Vanguard has an excellent one in the Vanguard 500.  If you are not flat out retired do not waste time in bond funds or in cash place all your assets in index funds or in stock funds if you have no index funds in your 401-k plan.  If you are retired and can move your 401-k money wherever you like so again move it to a Vanguard IRA and maybe spread it out with about 20% in Vanguard 500, 40% in Vanguard Equity Income, and 40% in Wellesley Fund.  Safe, dependable income, some growth, and good sleep at night. 

The next choice in placing money away for the future is selecting a Health Savings Account for your health insurance choice at work.  These vehicles are excellent if you are young and thus are spending next to nothing in healthcare.  Place the maximum amount if they will let you.  For 2014 they are $3300 for individual and $6550 for family plans.  If you are 50 or over you can add $1000 to each of those amounts. The choice here is simple sent your money to a insurance company and let them insure you to pay a small co-pay and deductible or send your money to your account and save the money for future health care needs.  Yes you might have to pay for some healthcare needs above a annual physical included in the High Deductible Health Plan, that is paired with a HSA, but in the end you are protected against a big time expense by the plan and if you stay health the money can just pile up inside your HSA. 

If, and this is a big if since most people do not make it this far with their money, once you have fully invested in your 401-k, your Roth IRA, and your HSA, then you can look at other investing opportunities.  The first choice would be a cheap Vanguard Annuity which is a tax advantaged way to put money away with the magic of tax deferred compounding like a 401-k with no contribution limits.  Note I said cheap here since annuities are wrapped in an insurance product which increases the cost of investing.  

The only time you invest in individual stocks is if you have the time and patience to do significant research to know what you are doing since owning one stock can pose great risk to one's assets.  Once again first up is maxing out your 401-k plan at work, maxing our your Roth IRA, and finally maxing out your HSA.  I expect 90% of all people will be covered by these three options.  So ignore all that noise, put your money on regular contributions and sleep at night knowing your money is safe and there will be plenty there to retire on when the time comes.