Question

Which two investment options would be best if you are 20 years old, just starting to save, and want to retire when you are 70? Consider the kind of investment, rate of return, level of risk, and other factors.

Answer 1

Answer:

You have not provided any options. However, since this is more of a practical question, the suitable answers are,

• Mutual Funds
• Certificate of Deposits
• High yield bearing Bonds

Explanation:

Mutual funds are a wonderful option to track the share market without exposing yourself to too much market risk. A mutual fund holds a diversified portfolio of stocks that distributes risk among various companies from different industries.

That way, even if the market is poorly performing, as a whole, the fund will be stable. Moreover, in the long term, since you have 50 years until you are 70, compounding your dividends will make you a lot of money to retire.

Besides, mutual funds have a high liquidity, making it easier for you to withdraw your money.

Certificate of Deposits are virtually risk free and provides a descent income through the high interest rates.

The main benefit here is the compounding effect of the interest. Since 50 years is a long time frame, even if you start small, you can eventually end up with a hefty sum to help your retirement. Because the compounding effect will be highly effective in the long term.