Investment Planning by the Decade

Whether the market rises or falls, you need to stay the course and invest throughout your lifetime

40 Somethings
Those in this group are hitting their peak earning years, but this is also where expenses, such as home improvements, and college tuition, tend to skyrocket. Individuals in this category should:

  • Look to maximize contributions to all their retirement accounts
  • Ensure that emergency and college savings plans are well-funded
  • Become budget conscious and resist the urge to purchase unnecessary big-ticket, depreciating assets
  • Make sure that they have begun the estate planning
  • process, including the drafting of a will

This group should consider the tax-friendly, low-cost, and high-reward potential of ETFs, says 40-year-old David Lopez, a tax consultant and founder of David A. Lopez and Co.  L.L.C. (www.davidlopezcpa.com) in Philadelphia. Lopez suggested his forty-something clients, a couple with a combined household income of $160,000, look at three ETFs to invigorate their underperforming portfolio of stocks, bonds, and money markets. Lopez says, “The couple was able to get into industrials, healthcare, and the financial sectors without making various transactions to purchase individual equity securities in those segments. It gave them the ability to ‘test the waters’ by buying smaller positions at various times since investment minimums are nonexistent.”

One pick was Invesco PowerShares QQQ (QQQ), 68% technology-centered with holdings in Apple Inc., Microsoft Corp. (MSFT), Intel Corp., and Cisco Systems Inc. (CSCO). It was up 24% since 2009, compared to 18% growth in the Nasdaq composite index. Second, Guggenheim Mid-Cap CORE (CZA), which invests heavily in industrials, financial services, and utilities with holdings in Ameriprise Financial Inc. (AMP), Paychex Inc. (PAYX), Xerox Corp. (XRX), and HCA Holdings Inc. (HCA). The three-year average annual total return of the Morningstar five-star-rated ETF was 22.5%. The third fund was Rydex S&P MidCap 400 Pure Growth (RFG), which focuses on healthcare, industrials, and consumer items. Among others, it owns Regeneron Pharmaceuticals (RGN), ITT Educational Services (ESI), and Equinix Inc.(EQIX). Its three-year average annual total return was 34.86%.

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