The most important part of any type of investment is risk and there are a few ways to define it. The first is how much you can afford to lose and how likely or possible is it to happen. Another type of risk is the risk of not taking advantage of opportunities that can provide income or future wealth with little chance of losing your investment. A third type of risk involves the timing of your investment. You may run the risk of getting in an investment right before it begins to fail or fall in value or getting in after a period of impressive performance which now slows down or stops. Also waiting too long out of fear or indecision can prevent you from getting in at the beginning of a good investment.

When you decide to invest in Mutual Funds or stocks and bonds you must know the position you’re in now and where you will possibly end up, in needs or wants. As mentioned in previous articles there are many types of Mutual Funds to invest in and there is no one formula or package that fits ‘everyone’ since all our needs and wants are different. The differences are: age, income level, tax bracket, marital and family status, health, employment pension plans, available money to invest and of course needs and wants.

First consider age as to how long you will be investing and what goals you have for the coming years. Generally the younger you are the more risk you can accept since there will be plenty of time to recover from losses in value. Also there will be a lot of time for your investments to grow large through reinvestment and the overall increase in Stocks and Bonds over time. Also as you age you should adjust the mix of funds your total investments are in to protect your retirement years from various types of risk or loss. This means from Stock funds to Bond funds and the Blended ones in between.

Next is Income level. Obviously the more money you have to invest the more you will earn in income and value. But also you will have greater opportunity to spread a larger amount of money through many fund styles with smaller amounts to lower overall risk and take chances in riskier areas that might pay off in time.

Third is Tax Bracket. I explained how to find your tax rate for 2017 in the previous article and now you’re filing 2018 with the new tax laws. So for 2018 there’s only a 1040. Your total tax bill is line 15, your Taxable Income is line 10. Divide line 15 by line 10 to find out the actual percentage you’re paying on your net income. Multiply by 100 to get the percent.

Depending on how high or low your rate is will determine whether or not you should deposit IRA monies into a traditional or Roth IRA. Low rate people, those who are young or lower income earners should use Roth’s since there’s little tax savings now but NO tax on your withdrawals when you retire. People in high brackets roughly 25%+ who also are older, say over 55 and closer to retirement may consider Traditional and get the tax savings now. But in either situation don’t put tax-free investments such as Municipal Bond funds in IRA’s since they are already tax sheltered. You would be giving up income for nothing in return.

Marital status and health are very personal things that can affect how you view your future needs more than wants. You should discuss this with whatever adviser you might have and consider reading money magazine and Kiplinger’s Personal Finance; both are written for non-financial investors.

Please meet with a licensed financial advisor to determine the best course of action for you as an individual.