A smart and simple approach to investing can help take the fear and doubt out of saving for retirement. The most important thing is to start right now.
Bitten by the bear one too many times and uncertain about their jobs and the economy, investors have avoided stocks even after the market's rapid ascent. Indeed, the strong rebound over the past 10 months makes many sidelined buyers only more afraid to get on board, and the recent sell-off likely exacerbated those fears.
Their mantra: We won't get fooled again.
Uncertainty, mistrust, cynicism -- these are what we feel when we feel taken. And investors are right to be suspicious. "This time it's different" was Wall Street's mantra in a bull market that had lost its compass and, later, during a housing market flush with cheap credit. Nothing was different, of course. The booms ended badly, and many investors are still paying a high price.
This time, you can be different. The 1990s market is gone, along with its wild double-digit yearly gains. So plan how to make your money last into your 90s. Act decisively, learn about financial matters, and put knowledge into practice. Stocks will take another hard tumble -- or maybe bonds will be next. If you're certain of where you stand, you'll have little to fear. Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 304, 314, {"configCsid": "MSNmoney", "configName": "player-money-4x3-articles-inline", "player.pg": "MSVNIC", "player.bsbpg": "MSVNI3", "player.vcq": "videoByUuids.aspx?uuids= 9815cdda-f5db-411f-ac02-5176bc6101dd,6fc2d739-184f-462f-9add-5b6d15723273,b4325006-4cf7-485b-9c22-3fad97e40c65,a2117fd6-52d2-45e6-9109-314a3625cb64,5b5e5e42-1ee2-47df-827f-ee1e09694bc1,a6074b09-2403-4fc1-8210-8872a9482d39,6c002c03-6221-4280-a96b-ba12091f873b", "player.fr": "iv2_en-us_money_article_Investing-Company-Focus-inline"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=9815cdda-f5db-411f-ac02-5176bc6101dd,6fc2d739-184f-462f-9add-5b6d15723273,b4325006-4cf7-485b-9c22-3fad97e40c65,a2117fd6-52d2-45e6-9109-314a3625cb64,5b5e5e42-1ee2-47df-827f-ee1e09694bc1,a6074b09-2403-4fc1-8210-8872a9482d39,6c002c03-6221-4280-a96b-ba12091f873b;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');"Hoping (your investments) are going to come back isn't going to change anything," said Nathan Dungan, the founder of financial consultancy Share Save Spend. "Hope without a plan is denial. If you don't have a plan for dealing with the current environment, nothing is going to change."
There are many ways to get your retirement back on track and put your financial future into perspective.
Here are three smart, simple steps to start: 1. Dollar-cost-average into your asset allocation Which is more influential to investment returns: individual stock and bond selection or how much money you invest in a broad category? Studies show that asset allocation -- the percentage of your portfolio committed to stocks, bonds, cash and other holdings -- is far more influential than what you actually own.
Although you cannot control the performance of a stock, you can set your asset allocation according to your risk tolerance. Some folks don't like scary movies, so they don't watch them. If the 2008 market was too horrible, then don't invest as much in stocks.
"You have to remember the past -- what it felt like to experience that volatility -- and decide whether you can go through that again," said Ross Levin, a financial adviser in Edina, Minn. "If you can't handle that volatility, you're either going to have to spend less money or work longer."
Fixing a broken retirement system
A standard rule of thumb is to use 100 minus your age as a ballpark for how much to have in stocks. So if you're 40 years old, put 60% of your portfolio into stocks. If you can't stomach much volatility, invest like a retiree and keep a larger portion in bonds.For an even smoother ride, use dollar-cost averaging. That means investing a set amount on a regular basis, purchasing more shares when prices are low and fewer shares when prices are high. This automatic approach takes emotions out of buying and can vastly improve your total return, especially in choppy markets.
Consider the fortunes of an investor who methodically put $500 into the S&P 500 SPDR (SPY, news, msgs) at the close of the first trading day each month beginning on Sept. 2, 2008, and ending on Aug. 3, 2009. At the end of those 12 periods, the $6,000 invested would have been worth $6,578, for a return of 9.6%. The exchange-traded fund, meanwhile, tumbled 21.5%.
Continued: Catch up as much as you canMore from MSN Money and MarketWatch
Dividend stocks: Still your best betLooking for a fix for retirement security4 sectors stuffed with cheap stocksA retirement-saving formula that's right for todayYour best 401k moves for 2010The size of a nest egg is no measure of a man1 | 2 | next >
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Rule 2. Keep moving, your going to want to be able to move without pain..
Rule 3. Be in, and make love...
Have a Happy Retirement, We are...
ReplyReport AbuseKansas Beachbum #2Wednesday, February 03, 2010 10:34:42 AMFrEddd...very nice, great perspective on life! ReplyReport AbuseSore Loser #3Wednesday, February 03, 2010 10:58:26 AM
Here is a better idea to stay away from fees, commissions, expenses, and market volatility: open up high yield savings and CD's that way you ensure FDIC coverage and avoid market volatility(Fixed Assets with fixed Returns). I know people are going to argue that these two instruments do not keep up or beat inflation, buy hey, you are not losing money to fees, commissions, expenses, and a down market! You can set them up how you want: Trust accounts, Individual, Joint, and you can list a Payable on Death. Needless to say, you always have access to your funds with respect to savings and during the maturation of the CD without any limitations to age requirements, lump sum distribution vs. annuity distribution based on government tables.
Consumers and Investors are going to have to start thinking outside of the box and what is best for them. One size does not fit all.
ReplyReport Abuse1 - 3 of 3PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/learn-how-to-invest/3-golden-rules-for-better-golden-years.aspx?page=2&','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease notify us using the Report abuse form below. We will investigate your report and take appropriate action against offenders. We report all illegal activity to authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit To add a comment, pleasesign inMSN privacyLegalAdvertiseRSSHelpFeedbackSite mapAbout our ads© 2010 MicrosoftThere are many ways to get your retirement back on track and put your financial future into perspective.
Here are three smart, simple steps to start: 1. Dollar-cost-average into your asset allocation Which is more influential to investment returns: individual stock and bond selection or how much money you invest in a broad category? Studies show that asset allocation -- the percentage of your portfolio committed to stocks, bonds, cash and other holdings -- is far more influential than what you actually own.
Although you cannot control the performance of a stock, you can set your asset allocation according to your risk tolerance. Some folks don't like scary movies, so they don't watch them. If the 2008 market was too horrible, then don't invest as much in stocks.
"You have to remember the past -- what it felt like to experience that volatility -- and decide whether you can go through that again," said Ross Levin, a financial adviser in Edina, Minn. "If you can't handle that volatility, you're either going to have to spend less money or work longer."
Fixing a broken retirement system
For an even smoother ride, use dollar-cost averaging. That means investing a set amount on a regular basis, purchasing more shares when prices are low and fewer shares when prices are high. This automatic approach takes emotions out of buying and can vastly improve your total return, especially in choppy markets.
Consider the fortunes of an investor who methodically put $500 into the S&P 500 SPDR (SPY, news, msgs) at the close of the first trading day each month beginning on Sept. 2, 2008, and ending on Aug. 3, 2009. At the end of those 12 periods, the $6,000 invested would have been worth $6,578, for a return of 9.6%. The exchange-traded fund, meanwhile, tumbled 21.5%.
Continued: Catch up as much as you canMore from MSN Money and MarketWatch
1 | 2 | next >
Need answers fast? Find definitions for investing or financial terms.
Rule 1. Don't worry about anything, especially money..
Rule 2. Keep moving, your going to want to be able to move without pain..
Rule 3. Be in, and make love...
Have a Happy Retirement, We are...
Here is a better idea to stay away from fees, commissions, expenses, and market volatility: open up high yield savings and CD's that way you ensure FDIC coverage and avoid market volatility(Fixed Assets with fixed Returns). I know people are going to argue that these two instruments do not keep up or beat inflation, buy hey, you are not losing money to fees, commissions, expenses, and a down market! You can set them up how you want: Trust accounts, Individual, Joint, and you can list a Payable on Death. Needless to say, you always have access to your funds with respect to savings and during the maturation of the CD without any limitations to age requirements, lump sum distribution vs. annuity distribution based on government tables.
Consumers and Investors are going to have to start thinking outside of the box and what is best for them. One size does not fit all.
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