Retirement Savings Dos and Don’ts
I had dinner with my best friends last night – a monthly tradition that usually turns into a full night of fun. Not this time, however. It turned out my friends were all in a state over their retirement accounts. Their mutual funds invested in stocks were trading at lousy prices, they couldn’t find any decent-priced income generating securities anywhere, and when it comes down to it, what’s the point in investing anyway if your account value can get cut in half?
We covered so many savings and investment basics that night – over Spaghetti Carbonara and Tiramisu – I thought I should share.
- Ceasing to contribute to your retirement account is a don’t. With many nest eggs now considerably smaller, adding money is more pressing than ever.
- Rebalancing your portfolio is a do. The investment climate is much different now than, say, a year ago. Your portfolio should reflect this.
- Buying income-generating securities, such as mutual funds invested in bonds, is a don’t. Why? Because with every investor on the planet rushing to buy them, yields are infinitesimal and you won’t make money. It is much better to wait until the public has recovered from the shock and is rushing to buy securities with more risk exposure – thenyou can score yourself much higher yields.
- Shifting your investment strategy toward mutual funds invested in stocks is a do. Have you ever heard the expression “buy low, sell high?” I thought so. With the lower stock prices today, the downside to buying such securities is much smaller.
- Thinking long-term is a do. True, short-term forecasts are looking pretty ugly. But if you apply a long-term perspective, things immediately brighten up. After recession follows economic growth and boom. Always. If you keep this in mind, you can make smart investment choices. Just as the falling real estate prices are only going to hurt those who need to sell within the foreseeable future, the fact that stocks and mutual funds are trading for practically nothing won’t hurt your savings unless you are trying to get rid of them.
Stacy Francis, Savvy Ladies