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Six Tips for Long-term Investment Success

Six Tips for Long-term Investment Success

    Bank savings accounts currently offer paltry rates of interest.  If you put leave all your money in banks it should be safe but will not grow much.  The stock market offers much more interesting returns but because of the element of risk many people avoid it.  Worse still they might enter the market at the top and then sell out later at the bottom.  Here are some simple rules to help you navigate the market and build a large stock portfolio over a long period.

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    1. Diversify. Spread your risks by investing in a number of stocks in different markets and in mutual funds, bonds and other instruments. A good rule is that no one stock or other investment should be more than 10% of your total portfolio. Invest in different geographic areas such as US, Europe, Asia and emerging markets. Diversify into property funds, commodity funds and hedge funds. This should give you protection against a collapse in any one particular sector.

    2. Do your research. Take advice from various sources.  Invest in some companies whose products and strategies you like.  There are a multitude of comparison sites and other resources on the internet to help you to analyse and understand investments. Past performance is no guarantee of future performance but I would generally prefer to choose a mutual fund or unit trust that had been a strong performer over the last two years and which offers low management fees.

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    3. Run the stars and sell the dogs. Monitor your investments and compare their performances against the market index.  If some of your holdings do well then the temptation is to cash in and take a profit.  It seems natural but if you are in this game for the long term then you want investments that grow over the long term so when you find winners cherish and retain them.  On the other hand you should ditch the dogs that significantly under perform the market.  The temptation is to hold onto them in the hope of a rebound or worse still to increase your holding at the lower price.  This is generally a poor strategy and it is safer to take a small early loss rather than a large one later on.  Do not cling onto stocks for emotional reasons.  Sell the dogs and run with the stars.

    4. Reinvest dividends.  A surprisingly large part of the overall growth in most portfolios comes from reinvested dividends rather than in appreciation of the stock prices. A yield of 3% may appear small but over a period it makes a big difference. Choose some investments with a solid history of dividends and use them as the ballast in your ship.

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    5. Be contrarian. This advice is much easier to give than to observe.  When the stock market is low buy stocks.  When the stock market is high sell your worst performing stocks and buy other investments such as property or bonds.

    6. Take the long view. You are in this for the long term so do not make frequent trades – the commission will eat into your funds. Do not follow fads and fashions.  Diversify in a sensible way.  Do not panic when markets occasionally crash – these are buying opportunities for the brave.

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    Finally be prepared to sell when you eventually need the money.  You invested it to build financial security for you and your family so it is better to use it when needed rather than to scrimp along in order to become the richest man in the cemetery.

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    Paul Sloane

    Professional Keynote Speaker, Author, Innovation Expert

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    Published on June 12, 2018

    How Much Money Do I Need to Retire? Find Your Answer Here

    How Much Money Do I Need to Retire? Find Your Answer Here

    It is never too early nor is it ever too late to start planning for retirement. It ultimately depends on your way of life, where are you living, and whether you need to let go of anything. A successful retirement strategy is to have enough pay to cover your expenses with a little cash going into a savings account for sudden financial needs.

    With regards to retirement, we all have an alternate vision in mind. In fact, some think about traveling throughout the world, while some think of a peaceful life with their grandchildren. Whether we get ready for it or not, we will one day turn to retirement age and so, we should be prepared for it. I’m going to tell you how in this article.

    Benefits of early ventures for retirement

    The way this works is you figure out where you need to live, the amount it will cost you to live there (rent/food/transportation), and the various expenses you will need to account for, like travel/insurance/medical bills and taxes. Many people are struggling to put aside money for their future savings and some haven’t started yet. Think you can put off thinking about retirement? The reality is that you need to start thinking about it right now, and putting aside some money from today.

    There are a lot of benefits of taking early steps towards retirement. Utilize the power of compounding, low investment for targeted corpus and you can create more corpus investing the same money:

    • If someone saves $100 every month and starts investing for 30 years at 10% return, initially you will see that within 5-10 years, your investments will not multiply. However, after that period, the corpus will increase immensely with the impact of compounding. The investment period expands the extent of profits increments in the corpus.
    • Suppose there are two people, one aged 30, and the other 40. Both need to resign at 60 with the same retirement objectives of $300,000 USD each. Both will put resources into an investment with 10% of the return. Thus, to accomplish their retirement objective, the younger one needs to save $100 USD / month and the older one needs to collect $300 USD / month. Since the older one has started investing ten years later than the younger one, he will pay more than double what the younger one will pay.
    • If someone saves $100 USD every month and starts investing at 30 years old till 60 and gets 10% annual return, his corpus becomes around $170,000. Otherwise, if he starts the same amount spending at 40 years of age with the same 10% return, he will have around $57,000 USD. He can profit by just investing ten years early.

    You can’t invest too much money in retirement during the early stage of your career since you may have different objectives. However, you can increase the investment gradually if you start investing just a small amount.

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    Average retirement age

    For many people who are nearing retirement age or recently resigned, one of their most significant financial regrets is that they did not focus on saving for their golden years. As per the Consumer Reports study, it demonstrates that only 28% of investors with the age of 55 years or older are pleased with the way they have saved for retirement.

    As per the report, The Economic Policy Institute breaks down how much Americans have put away.[1] Since you know that when the majority of people retire, you can subtract your age from that more significant number and check down what number of more years you need to work.

    But many retirees go back to work. Some of them do part time job while others do seek for a second career. Some even come back to full-time work and then retire again in a couple of years. So deciding their retirement age could be tricky.

    Average retirement savings

    To get retirement started, saving is pretty easy, though it can seem complicated. These simple five steps will make you go on retirement now. So, you don’t need to stress over having the same regrets as today’s retirees.

    1. Invest 15% for your retirement

    Your initial step is to save 15% of your income. This will depend on your gross income and does not include any coordinating assets you get through your employer’s retirement plan.

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    It’s sufficient to enable you to achieve your retirement investment funds objectives, but not too much to keep you from enjoying your income today.

    2. Utilize tax-advantaged retirement plan

    Yes, we utilized the T-word; however, don’t daydream! Split your 15% retirement contributing budget between charge conceded retirement plans like your 401(k) or after-tax plans like a Roth IRA.

    3. Invest your money around

    To put it all in one place is the most significant risk that you can take with your retirement money. With mutual funds, however, you can invest in the biggest and most recognizable brands as well as that new organizations you’ve never known about but has a lot of growth potential.

    Opt a growth-stock mutual fund with background marked by solid returns for both your 401(k) and Roth IRA speculations.

    4. Stay with it

    Since mutual fund investing is less risky than investing in single stocks, it is not risk-free. You can see your savings grow in the long term as long as you can leave your money where it is and keep adding to it.

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    5. Work with an investing professional

    It is essential to look for an investment professional, as you must have a lot of queries concerning your retirement plan during 30 or more years of investing,

    Never make due with an investment professional who recommends or patronizes you to turn over all your investment choices to them. Since this is your retirement, nobody will think or care about it more than you do!

    You might analyze or compare your savings against the average retirement savings for your age group to check whether you’re falling behind or getting towards of the curve. On the other hand, it might be conceivable to hang up the work boots and hit the shoreline with fewer savings if you live easily or below your means.

    How to achieve your financial goals?

    An ideal approach to achieve your financial goals is to stay focused on what you need for your future, ignore everything (and everyone) else that may divert you. There’s a significant business culture out there that requires you to stay in debt, live for the occasion and stress over your future later on.

    You need to start planning for your future from now, not when you have more time or money to invest. You can even talk to a financial advisor for any help. Cooperate to set your money goals and make an action plan to reach them. You can retire younger than you thought you could if you create a project and follow up on it.

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    Start planning for your retirement

    A lot has changed in the last 30 years; our previous generation had an career goal and they would join either a large private company or a government organization immediately after school or college. Then they would spend the next 38 years in the same organization and the form of provident fund and gratuity. They would retire with a decent corpus and they would later spend the remaining time with their pension benefits. It’s a bit different now, but with the above information, you’ll be well prepared.

    Whether you can afford to retire now or not, you need not bother with a retirement calculator to get a rough estimate. You should have the capacity to closely approximate your daily spending habits to figure out how much money goes out the door every year.

    Featured photo credit: Pexels via pexels.com

    Reference

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