If you’re reading this, you probably have retirement plans somewhere in the back of your mind. I thought I would take a different approach to this message and give you tips on what NOT to do on your way to a successful retirement.
Do Not Diversify Your Portfolio:
Ten to twenty stocks are plenty to spread out your risk, right? All you need are a few “good” stocks to grow your portfolio and everyone knows which ones you should buy. A better approach is to spread your risk across a variety of stocks in different countries and asset classes. Also, don’t forget the ocean of opportunity in fixed-income instruments to reduce risk and potentially increase your return.
Don’t Be a Consistent Saver:
Who has the time to deal with making a transfer to retirement savings this month? Anyway, I have a lot of bills this month, so I’ll just think about it again next month. This is definitely something I’ll deal with later. When working on investment plans for clients, the best results come from those who are disciplined in meeting their savings goals. You often hear the advice, “Pay yourself first” and it’s a great way to ensure you are on the right path.
Let What You See on the News Influence Your Investment Approach:
I’m not sure this is the right time to get in the market. After all, if my political group doesn’t win the election, the country is going to pot. And what about all of this turmoil in the economy and overseas? I think I’ll just wait until everything feels “safe.” There will always be something to worry about concerning the markets. If you don’t know what that is, tune into your favorite investment show on television and they will make sure you do.
Just Buy the Hot Stocks:
That’s how the pros do it. They are always looking for the next big thing. Pick out the stocks or funds that performed the best last year and those should be what you invest in. Research has shown that pursuing yesterday’s winners is not a successful approach to investing. It is difficult for anyone, including investment professionals, to know what the best-performing opportunity will be.
Don’t Be Patient:
If your returns aren’t what you wanted over the last year (or month or week), it’s time to change it up and find something better. The best investors always know how to change things up at the right time. Over the past 100 years in the stock market, there has been frequent rotation of the best-performing sectors and asset classes. Just because one area of the market has not been performing well does not mean you should abandon it. A diversified portfolio means you own
the best and least performing areas of the market, and we know those areas change frequently and unexpectedly.
I’m obviously indulging myself by poking some fun at the conventional wisdom of investing. There are many ways to prepare yourself for a successful retirement. Hopefully, the counterpoints above will help you get yourself on the right track and help you remove some of the risks from your plan.
The Expert:
Shaw Pritchett is a Financial Advisor and President of Jackson Thornton Asset Management in Montgomery.
Contact: Shaw Pritchett / 334.240.3679 / [email protected]
