Employing a sound investment strategy is mission critical in order to one day retire comfortably. Retirement is something near and dear to my heart, I put in a lot of hours at work and I’d like to reward myself with as many years of a work free life as possible. The sad truth is that many people nearing retirement age do not have adequate savings, which means they have to continue to work for several more years, if not the rest of their lives. By saving and investment your money at an earlier age you can take advantage of dollar cost averaging and compounded interest to really build up your retirements. Just make sure you pay attention to a few simple rules along the way.
First and foremost, take advantage of employer sponsored retirement plans. These could be 401k’s, IRA’s, or some sort of defined pension plan. Regardless of what they offer it is vital that you are contributing (at a minimum) enough of your own money in order to take advantage of any match the employer offers. Even if they don’t offer a match chances are they are paying most of the plans fees, which can still add up. Too often I hear about people who don’t feel they have the ability to save any money, thus losing out on the employer match and the compounded earnings on all of that money.
Diversification is very important to any investing strategy. You know that old saying “don’t put all of your eggs in one basket”, well that applies to your nest egg as well. Make sure you have a blended strategy that takes advantage of cash savings, mutual funds, and blue chip stocks.
Dollar cost averaging can be an investors best friend. Timing the market is just too risky, and quite frankly nobody knows where it’s going to end up each day. A smart investor will continuously invest their money into similar stocks and funds over a period of years. In doing so, you are able to weather the highs and lows of the market since you keep buying more stock at different prices. Some people want to wait on pullbacks, or perhaps sell stock when it’s high. The truth is that nobody knows where a stock price will end up day to day, so your best bet is just investing money at the same time each month.
Regardless of your investing prowess it’s important that you have some sort of strategy employed. Pay attention to the tips above and it will be a huge help in getting you started.