0 How to Set Up an IRA That Matches Your Personality

Are you a risk-taker? Are you heavily influenced by what your friends are doing? How about your outlook on the future- how stable is your income? Believe it or not, these things matter when it comes to investing for your retirement. Ask any financial planner or investment consultant: setting up an investment portfolio is not just about crunching numbers and analyzing stocks. It requires a bit of analysis of the investor, as well! A common way to save for retirement is to open up an Individual Retirement Account (IRA). An IRA is just a mutual fund that's set up specifically for you to draw income from after you retire.

Why Open an IRA?

There can be some tax advantages of opening up an IRA, but one of the main advantages is that you have the freedom to choose whatever stocks and bonds you'd like to invest in. That's different from an employer-sponsored retirement account, where you just put the money in and they choose how to invest it.

How Do I Know What to Invest In?

Well the freedom to choose your own mix of stocks and bonds is nice but what if that's all a bit over your head? What's the difference between a mix of 20% stocks and 80% bonds and a mix of 50/50% stocks and bonds? Well the good news is: you can use a financial investor to help you out. If you can't afford one, here's how to set up an IRA that meets your needs and matches your personality.

How Do You Handle Market Volatility?

If you are invested in a stock that lost 40% of its value in a three-month period, would you well it all, sell nothing, sell some of it, or buy more? Believe it or not, each one of these choices can make perfect sense for different people in different situations and with different personalities. If you choose to sell it all, then you are probably not too comfortable with volatility so you should consider including some bonds in your portfolio. Bonds are less risky than stocks in that they will more likely return a profit, but they don't have the exciting lure of skyrocketing in price to make you a huge profit.

How Secure is Your Future?

Are you bringing in a good income? Is your job stable? How about ten years from now? Is it reasonable to expect you'll be gainfully employed and able to keep on investing? If so, you can stand to inject a little bit of risk into your retirement portfolio. The theory here is that if you have a stable income, you can more easily recover from a possible loss if your riskier investments turn south. It can be well worth the risk to include some stocks that tend to see more ups and downs but have great potential to make you some serious money.

So...What do I Do?

Find a financial investing company that offers IRAs. Choose your portfolio according to how much time you have until retirement, how secure you think your income is and will be, and how you react to market change. If you have lots of time, can stand volatility, and have a good job, feel free to include some risky yet promising stocks in your portfolio. Otherwise, make it a nice balanced mix of stocks and bonds.