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The only way to successfully invest for retirement is to invest long term. Unfortunately most of us are unfamiliar with long-term investment because the financial industry thrives on short term speculation, not long-term income building. Here are some tips that can help you invest for the long haul rather than the short run.
If It Isn’t Losing Money Sell It
The great investor Ben Graham (who was Warren Buffett’s mentor) famously said “don’t loose money” was the most important advice he could offer an investor. He was obviously right. If an investment is losing money you should dump it rather than hold onto it. Even if you think that dog of a stock will turn around in the future, it makes no sense to keep it in your portfolio and let it eat up your cash.
Limit Your Trading
The fastest and surest way to lose money and keep losing is to constantly trade equities or securities. Limit the number of trades you make. A good rule of thumb is to trade only a few times a year. If you are trading more than every six months you are probably trading too much. Remember, every time you trade you pay a fee to the broker. This will often eat up whatever profit you make.
Ignore the Financial Media
The financial media’s job is to attract viewers or readers by publishing or showing the most sensational stories possible. The news they present often has little or no bearing on the average investor or the state of the market. Try not to pay attention even if the talking heads on TV are screaming that the market is falling, the economy is about to collapse and the second Great Depression has begun. Chances are they are wrong. Also ignore them if they start screaming that the greatest bull market in history has just begun. They are probably wrong about that too. Instead perform your own research and make your own decisions.
Stick with your Strategy
If you have a strategy and it seems to be working stick with it. If the stocks or funds you bought are making money keep them. The way to make money is to reinvest it in successful vehicles not to sell. Remember when you sell you will pay fees for the sell and more fees if you buy something else. Keeping your funds in one place for a long period is the way to make money. Something else to remember is that 90% of success in all fields including investing is based on persistence not ability.
Have some Insured Investments
Even the best stocks, ETFs and mutual funds are vulnerable to market volatility. That means you should have part of your funds in some sort of insured vehicle that will provide a guaranteed long term return. Examples of such a vehicle include annuities and insurance policies. Treasury bonds are a good alternative for those too young to take advantage of the tax advantages associated with annuities or insurance policies.
Be Aware of Inflation
The standard rate of inflation is around 5%, that means that almost all funds and most investments will lose 5% of their value each year. You must have a large percentage of your funds in something that will make around 5% just to preserve your funds. If you want to make money long term you will need vehicles that generate a return of 8-10% or higher. Look for safe vehicles such as indexed funds and indexed annuities they provide such returns without taking undue risks.
How Safe are Money Market Funds
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How Safe are Indexed Funds
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How Safe are Variable Annuities
Variable annuities are actually among the safest retirement investments around. There are some risks and potential risks associated with these investm...
