Only about 17% of American workers say they are "very confident" they will have enough money to live comfortably throughout retirement.1 To help reduce such uncertainty in your life, consider these five common investment pitfalls -- and how you might avoid them.
Mistake #1: Waiting to Maximize Your Contributions
The sooner you start contributing the maximum amount allowed by your employer-sponsored retirement plan, the better your chances for building a significant savings cushion. By starting early, you allow more time for your contributions -- and potential earnings -- to compound, or build upon themselves, on a tax-deferred basis.
Mistake #2: Ignoring Specific Financial Goals
It is difficult to create an effective investment plan without first targeting a specific dollar amount and recognizing how much time you have to pursue that goal. To enjoy the same quality of life in retirement that you have become accustomed to during your prime earning years, you may need the equivalent of up to 80% of your final working year's salary for each year of retirement.
Mistake #3: Fearing Stock Volatility
It is true that stock investments face a greater risk of short-term price swings than fixed-income investments. However, stocks have historically produced stronger earnings over the long term.2 In general, the longer your investment time horizon, the more you might consider adding stock funds to your portfolio.
Mistake #4: Timing the Market
Some investors try to base investment decisions on daily price swings. But unless you have a crystal ball, "timing the market" could be very risky. A better idea might be to buy and hold investments for several years.
Mistake #5: Failing to Diversify
Investing in just one fund or asset class could subject your investment portfolio to unnecessary risk. Spreading your money over a well-chosen mix of investments may help reduce the potential for loss during periods of market volatility. Diversification may offset losses in any one investment or asset category by taking advantage of possible gains elsewhere.3
Now that you are aware of these five common investment errors, consider yourself lucky: You are ready to potentially benefit from other people's experiences -- without making the same mistakes.
Contact us at our office (480)557-9727. We would be happy to help.
Jerry R. Gray, CERTIFIED FINANCIAL PLANNER ™
Founder and CEO
1Source: Employee Benefit Research Institute, "The 2018 Retirement Confidence Survey," March 2018.
2Source: DST Stsyems, Inc. Stocks are represented by total returns from Standard & Poor's Composite Index of 500 Stocks, an unmanaged index generally considered representative of the U.S. stock market. Fixed-income investments are represented by annual total returns of long-term (10+ years) Treasury bonds. Indexes do not take into account the fees and expenses associated with investing, and individuals cannot invest in any index. Past performance is no guarantee of future results. With any investment, it is possible to lose money.
3Diversification does not assure a profit or protect against a loss in any market.
Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.
© 2019 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.
This commentary on this website reflects the personal opinions, viewpoints and analyses of the Graystone Partners Wealth Management, LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Graystone Partners Wealth Management, LLC or performance returns of any Graystone Partners Wealth Management, LLC Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Graystone Partners Wealth Management, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.