I understand the need to invest but I'm not sure I have the nerves for it. It seems like the stock market takes nerves of steel and I want to sleep at night. My 401k has all but disappeared and I am scared to death to keep investing. Any suggestions on where a safe place to invest would be?
If you aren't out of debt yet the safest place to invest is in your debts. I'm talking about all your debts...credit cards, car loans, mortgage, etc. Every dime you put towards the principal is like a guaranteed rate equal to the interest you are being charged.
I agree that Wall Street is scary if you don't know what you are doing and 401k's are largely invested in Wall Street. Another problem with 401k's is that many employers are reducing or eliminating the company match. If that's your case you may want to consider stopping any funding there and use the money to accelerate your debt payoff.
Before you focus on investing, the best (and safest) thing to do with your money is eliminate your debts. Every dollar of debt you eliminate raises your net worth that same amount. Paying off a $20k credit card balance increases your net worth $20k. Paying off a $200k mortgage raises your net worth $200k. Once your debts are eliminated and you have a substantial disposable cash flow there are many ways you can invest that money besides stocks and bonds. The D2P plan will provide several suggestions once you have completed the debt elimination phase. In the meantime stay focused on your goal of eliminating debt and building savings which will eventually be your investment capital.
In the meantime you can look at other investment options with your 401(k) if you want. If your employer is matching your contibution it may make sense to contribute up to whatever your employer matches. Unfortunately 20% of employers have eliminated or reduced their match in light of the bad economy. If your employer is one of them you may want to rethink and even reduce your contibution, or at least change your elections to something more in line with your risk tolerance.
