Investing for retirement is one of the big financial undertakings most people will deal with in their lifetime.
With all of the different investment products available, getting started with your retirement savings can be a little overwhelming. Making smart investment decisions will help you to save more money and live comfortably throughout your retirement years.
7 Investment Strategies to Help Grow Your Nest Egg
Here are seven investment tips to help you find your path to financial stability.
1. Invest Early
Some of the most common investment advice given is to start saving for retirement as early as you can.
You can open an IRA at any age, and many student jobs will allow you to set aside part of your paycheck into a retirement savings vehicle. Retirement may be a distant dream to college students, but it will come upon you faster than you think.
The benefits of investing early are that the longer you save the more you can save. Plus, the longer you save the more the magic of compound interest can work for you.
2. Invest Often
The best way to grow your retirement investment account is through regular contributions. The benefit to investing smaller chunks of money more often is that it will help even out the fluctuations in the market.
If you invest on a schedule, you will likely be buying low sometimes and buying high occasionally too. Ideally, the highs and lows will average out to a steady return rate.
If you wait to make your maximum allowed IRA contribution all at tax time, the market may be high and you will end up losing some of your investment when it drops down again.
3. Automate Your Investments
Remembering to make weekly, twice per month, or monthly investments can be tough, so automating your investments is the way to go.
Most employers allow employees to have money taken directly out of their paychecks and contributed to an employer-organized retirement account like a 401k.
If you are also funding an IRA or another investment account, most investment banks allow you to set up automatic contributions. They’ll also, in many cases, wave their transaction fees for automatic investments.
Set it and forget it is a philosophy that works well in many areas of life, and investing is no exception.
4. Invest in What You Know
When choosing what to invest in, it is wise to go with what you know. If you work in high tech, you may have confidence in your knowledge of what companies are doing well.
If you are in retail, you are probably familiar with which retail chains are making smart decisions. Which are doing good business, and which would make good long-term investments.
If you don’t know much about a particular area, you will be relying on your own research when investing in specific companies. There may not be enough information available publicly to make an informed investing decision.
5. Consider an Investment Adviser
If you choose to buy individual stocks rather than investing in funds that incorporate many companies and business sectors, you may want to seek the advice of an investment adviser.
Banks such as Stephens, Inc., an investment bank led by Warren Stephens, provide investment advice to individuals and groups.
An investment adviser can save you time and help you make more money by doing the research for you in a professional, thorough manner. They can also suggest ways to balance your stock portfolio that are appropriate for your retirement goals.
6. Diversify Your Portfolio
The goal of long-term investing is to minimize the negative effect of market fluctuations on your bottom line.
You do this by investing in a variety of business sectors with the idea that while some businesses are doing well, others are foundering. It all balances out over the forty years you own their stock.
You can diversify your investment portfolio by picking individual stocks in different business sectors. Or, you can buy into funds that include many different stocks, hand-picked by investment professionals to be balanced.
Depending on your investment style, stocks or funds may be a better choice.
7. Adjust Your Strategy According to Your Age
Another piece of advice often given is that the closer to retirement age you are, the more conservative your investments should be.
Stocks are considered riskier investments with more potential for big rewards, and bonds are low-risk and lower return investment vehicles.
If you are managing your own investments, you will want to slowly shift the percentage of your investments from mostly stocks to mostly bonds over time.
Many investment banks have their own target retirement date funds you can buy into that will be adjusted for you with the target date in mind. This is ideal for the hands-off investor.
Keeping these seven points in mind while planning your retirement investment strategy. This will help you maximize your return on investment in the long term.
Striving for slow and steady growth is the best approach when it comes to retirement investment, and following these tips will help you achieve that goal.