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Hold your breath, but no one really knows how to invest money or where to invest for 2014, 2015 and beyond. Asset allocation is the name of the game for investors both large and small, and the near future looks challenging. Your success will depend on whether or not you know where and how to invest money across the asset classes.Think of asset allocation as HOW to invest. You can be conservative, moderate, or aggressive in pursuit of a long term financial goal like retirement. As to WHERE to invest, think of mutual funds if you are an average investor. The question is which funds and how much to allocate to each. Your three basic choices, in order from safe to risky are: money market funds, bond funds, and stock funds.Now, why will knowing how to invest money for 2014, 2015 and beyond be challenging for investors? The reason is that none of the average investor’s three fund choices look attractive. With record low interest rates in the economy, safe interest-paying options (like money market funds) are paying next to nothing; and quality bonds (and bond funds) are only earning interest in the 3% range. Stocks and stock funds have been winners for 5 years running, in a lackluster economy that may be slowing down. Asset allocation and knowing how and where to invest is a tough call when none of the three basic asset classes looks attractive.In hindsight, where and how to invest money actually was a pretty simple call up until 2014. An asset allocation of 50% to 60% in stocks with most of the rest going to bonds worked just fine for most of 30 years, and risk was moderate. Bonds and bond funds were steady performers, and often acted to offset losses for investors when the stock market got ugly. Actually, knowing where to invest and how to invest money has been a relatively simple proposition since the early 1980s. That’s when inflation and interest rates peaked… and then basically declined for over 30 years.Memorize this: bonds and bond funds go up in value when interest rates fall. That’s the way they work, and that’s why they performed well for most of 30-plus years.Looking at 2014, 2015 and beyond… investors could be in a whole new ball game if or when inflation and/or interest rates go up significantly. In 1981: short term CDs, mortgages, and high quality bonds and bond funds were all at 15% or more. Money market funds peaked at 20%! Compare that with today’s record low rates. How would a significant increase in interest rates affect your asset allocation decisions in terms of how to invest money and where to invest it?An asset allocation of 60% stocks and 40% bonds would no longer carry just a moderate risk because rising interest rates would guarantee that bonds and bond funds would LOSE money. Higher rates mean lower bond prices (values). At the same time, it would be too aggressive for most average investors to load up on stocks and stock funds. The bull (up) market in stocks is more than 5 years old. Plus, rising interest rates can hurt corporate sales and profits – which tends to lead to lower stock prices. On top of that, if you are too conservative and safely sit on the sidelines, sooner or later you’ll need to decide how to invest money and where to invest it. Otherwise, you’ll never get ahead and achieve the growth necessary to reach your financial goals.Average investors need a moderate asset allocation that they can be comfortable with in 2014, 2015 and beyond. Splitting your money between just stock funds and bond funds could be too risky for you going forward. The simple answer to where to invest hasn’t changed: money market funds (or another safe option), bond funds, and stock funds. But you might want to modify your strategy for how to invest money across these asset classes, in order to lower your level of risk.A simple solution to how to invest money: spread your money equally across the three asset classes, one-third each. If you want to take things one step further, consider adding alternative investments like gold, oil, and other natural resources to your asset allocation mix. This fourth level of alternatives has sometimes been the answer to where to invest when the stock market gets ugly. There are specialty stock funds available to average investors that specialize in these sectors: gold funds, energy funds, and natural resources funds.Above all else, realize that 2014, 2015 and beyond could be a different playing field if interest rates go up as many market watchers forecast. No one will really know how to invest money or where to invest it if rates take off – but by positioning yourself with a moderately conservative asset allocation you can avoid heavy losses. Then, when the dust starts to settle, you can start accumulating bond funds and stock funds when share prices are cheap.

Financial planning and investment is all about finding out where to invest your money so that you can get the best possible returns. Real estate investment has always been considered as safe because seldom the demand for real estate witnesses a dip. Property investment is the safest and there are strong reasons as to why it is given priority than other forms of investments like mutual funds, bonds, stocks and ETF. You can literally grow your money through property investment with minimum risk.Investors skittish of stock market investments prefer to invest in the real estate market but there are many who have not yet got over the 2008 downturn. Scars of those days have not yet healed for many and they are not ready to invest just for the sake of property investment. They need strong and logical reason behind this investment; they prefer to wait it out rather than put in all their money hastily.If you take property investment decisions in haste, chances are high that you will end up with something in your portfolio that would fail to produce the desired ROI. In property investment, only four different routes prevail; however, here we are going to look at only two of the most popular ones.First: You can go ahead and invest in a rental propertySecond: You can buy shares in the REIT or real estate investment trustBuying the rental property is quite straightforward method wherein you buy a rental property and give it out on rent. However, this type of investment is not for everyone as many fail to juggle their professional lives and at the same time upkeep a property like a landlord. It takes a lot of time and effort to maintain the property you buy unless you are using the services of a management company. You can obviously use the services of a management company but be ready to take a cut in your profits.On the other hand if you invest in REIT, you don’t have to actually own a property on the ground and go into the landlord-mode. It operates just like a mutual fund and the only difference here is that it is property investment. The trust is a group of investors who make property investment and lets the individual investors buy its shares. The trusts are able to receive tax benefits as they pay a major chunk of their income to their shareholders. You can buy shares on public investments, which implies that your investment is quite liquid. You are ensured of regular dividends.Two other methods of property investment that are often used by investors include notes and croudfunding portals.Notes – You will be able to invest in second mortgages, paper notes etc. You can even sell or buy notes just like other real estate invest estates. The best thing is that there are no brokers involved in this.Crowdfunding Portals – Many people with similar investment interests can come together to fund real estate investments. This is a new form of investments and is being tried out by some.

How soon would you want to know if your investment advisor wasn’t telling you about the three major investment types? If you’ve only heard of two – Variable and Fixed, then you may have a problem.Unfortunately, many investment advisors routinely fail to present all three types: Variable, Fixed, and Indexed as valid investment choices to their clients. This is normally because they are unable to offer all three options or they have a personal dislike for one or more of these investment types.So what is the difference in these investment types and what do the terms mean? The simplest answer is that these terms define how interest is earned on your investment. More specifically, it tells you how your money is invested and if your money is protected from market fluctuations. Let’s take a look at these various investment options.VariableA Variable investment is one where your money is typically invested in stocks or mutual funds. The performance of these stocks or funds varies and is not guaranteed – hence the term “variable investment.” Variable investments have many key benefits. They allow you to earn interest by investing in a single company (individual stock), multiple companies, or a specific segment of the market (mutual funds). You can even invest in an entire Index like the Dow Jones or S&P 500. Also, variable investments allow for the greatest return and historically have outpaced all other investment options.Sounds pretty good, right? It is, as long as you have the tolerance to lose money as well. The volatility of variable investments is a major concern for many investors. The “upside” or growth potential is nearly unlimited, unfortunately so is the “downside” or risk of losing money.One other adverse factor that Variable investments face is the cost. Most have either fees or loads associated with the underlying investments. These fees or loads can reduce the performance by as much as 3.5%, although 1-2% is more common. These fees or loads are applied even in down years so it is definitely something to consider.FixedA Fixed investment offers a pre-determined or fixed interest rate for a specified period. This is most commonly seen with bonds, CD’s, annuities and universal life insurance products.Fixed investments have three major advantages over the other options. First, they provide a guaranteed or known interest rate that is disclosed prior to making your investment. Second, fixed investments are generally designed to protect your initial or principal investment.A Fixed investment also has two major pitfalls. First, because they provide a known or guaranteed interest rate, they generally provide a lower rate than what may be available when you’re willing to risk your principal. Second, they normally have restrictions or penalties associated with any withdrawals made during the fixed interest rates term period. This is especially true with CD’s and annuities.Overall, Fixed investments can be a great option for those not willing to risk some or all of their money, older clients using the investment interest to provide or supplement their income, and clients looking to provide a hedge against other, more aggressive investments.IndexedUnlike Fixed and Variable investments, Indexed investments are somewhat unique to the insurance and annuity marketplaces. An Indexed investment shares traits of both Fixed and Variable investments, but with one major difference – how interest is earned.With an Indexed investment the underlying funds are not directly invested in the stock market or an Index, nor are they directly invested in a bond, CD, or other fixed investment. They are however, secured by bonds or other conservative investments which provide a minimum guaranteed interest rate similar to a fixed investment.Generally, this minimum or fixed rate is lower than what is available in a purely fixed product. This is because Indexed products offer a higher maximum interest rate over Fixed investment products. The Indexed products determine the maximum interest earned using a formula based on three factors, all part of an option purchased by the insurance or investment company. They are the participation rate, the cap rate, and the reset period.The maximum interest earned provides “upside” potential while at the same time eliminating “downside” risk. In essence, it is like having the growth potential of a Variable investment with the “downside” protection of a Fixed investment. There is however a trade-off.An option, sometimes referred to as a call or put option, provides investment returns (interest earned) based on the growth of a specific market Index like the S&P 500 or Dow Jones. The option allows for lower initial costs, a pre-determined strategy for establishing current and future interest crediting, and ensures that money can’t be lost due to market fluctuations. The option also caps (limits) upside potential or growth.Many opponents of Indexed investments point to this limiting of growth, especially in years were the Index or stock market exceeds the Index (option) cap or participation rates, as the Achilles heel of these products. There is also some controversy over the way the Index rate is determined in future years.While Indexed products do have a minimum cap and participation rate that is known for the entire term period, the current or maximum cap and participation rates normally reset on an annual basis. This makes it difficult to determine what will happen in subsequent years. Some advisors avoid these products claiming that the difference between the current and minimum rates creates client confusion.No matter which type of investment you choose, it is important to get the facts and options available for each. Each of the investment choices outlines provides different advantages that need to be weighed against their disadvantages, however they all have different uses and can all be viable choices when planning your financial future. As always, it is important to consult your “Financial Professional” to find out which of these investment choices is right for you.