« | Main | »

5 Tips for Investing in your Future

By Ashley Thiesen Caldwell | August 22, 2009

With the recent plunge in the U.S. economy, checking investment portfolios can be like doom’s day. Well, like it or not, the economy isn’t going to change much in the near future.

As the economy goes through drastic change, so will you. Investing will not be as easy and straightforward as it has in the past. You, the investor, will have to pay more attention to the upswings and downswings of the economy. Buy low, sell high.

Just because economic growth is slow, it does not mean your financial plan is dead. You must adapt, re-plan and attack. Below are five rules courtesy of Larry Carroll of the Charlotte Observer:

1. Someone needs to take responsibility for your investments. Whether you manage the money yourself or work with a financial professional, someone needs to be paying attention. Everyone needs a financial plan. There’s no need to change it constantly based on your quarterly returns, but one important lesson from this bear market is that any financial plan needs to be flexible.

2. Consider all of your options. Too many investors think in black and white. They either want the risk of stocks or the FDIC insurance of bank certificates of deposit. If you aren’t comfortable with the volatility of stocks for your whole portfolio, you may be more comfortable investing a smaller percentage of your assets in stocks and including more corporate, treasury, and agency bonds. The key is finding a balance and taking the right amount of risk for your situation. Some investors tell me they will reinvest in stocks when the economy looks better. The trouble is, the financial markets move before the economy. By the time things look better, markets will have already improved. The right thinking if you are out of the stock market: “I’ll get back in when things look worse.”

3. Invest with your head, not your heart. Investors spend too much time sorting through their feelings about their investments and the market. Financial markets don’t feel anything for you. If you start having feelings about your investments, you are creating the kind of one-sided relationship that your mother should have warned you about.

4. Use your human capital while you can. If you are still working, keep your job. Become indispensable. If you have recently retired, you may be able to find some part-time employment to help support your living expenses. This window of opportunity may not be open long. Working some in your 60s to improve your situation is a better option than trying to find a job in your 80s.

5. Be realistic about your financial goals. Retirees need to plan for a retirement that may last 30 or more years. That’s 30 years of inflation, so growing your investment assets in retirement may still be a priority. The biggest risks in retirement are spending too much in the early years, poor investment returns in the early years, and living beyond your income stream. Many retirees find it extremely difficult to set a budget and to stick to it in the first few years of retirement. Plan for those surprise expenses – a major car repair, a new water heater, an unexpected health care cost. Spend time understanding what you need vs. what you want, then prioritize your real goals.

The solution is simple. Revisit your goals and change them to coincide with the current market. Financial times in the near future will be shaky at best. Stick to your plan and stay on track, always striving to meet your goals.

Reblog this post [with Zemanta]

Topics: F.A.Q's, Investing, Retirement Tips & Things to Think About | No Comments »

Comments