by Nancy Osborne, COO of ERATE®
Depending upon your current age, your life expectancy could be far longer than you think. That means your period in retirement may last 35 to 40 years. Have you saved enough to support yourself and your spouse for that length of time without working? Get into the habit of saving now by paying yourself first when you receive each paycheck. Consider saving a top priority just as you would covering your housing payment and once you get into the habit of setting money aside it will become second nature to you. The sooner you start the process the less stressful saving will be on your budget both now and in the future and will feel like less of a sacrifice.
You must vigilantly track all the investment expenses and commissions you are paying as they will dramatically impact the overall return on your investments. If you are paying heavy loads (expenses) and high commissions on funds which are performing below their general market counterparts you will want to divest yourself of them as soon as possible. Stick with no-load funds and low commission investment vehicles. Seek investment advice from those professionals who do not have a stake in or benefit directly from the investment choices you make. Best to employ fee-based compensated professionals.
If you have gone through the process of setting goals and establishing a plan, stick with it. When you have a few minor set backs that's to be expected and should not be seen as an indication to abandon your plan and throw all your previously established goals out the window. Establish your asset allocation plan, check your progress periodically, and re-balance your portfolio as needed when it becomes out of proportion with your asset allocation goals.
To maximize your returns and manage your investment risk at the same time, you cannot put all your eggs in one basket. Avoid placing more than 4%-6% of your investments in any one stock, including that of your own employer's. Real diversification means spreading your money across multiple asset categories including stocks, bonds, real estate as well as global investments.
Keep your eye on the prize in the distance and don't allow every downward market move to rattle you. It's far too easy to panic when you're watching daily, weekly or monthly results. You should be in it for the long haul and not influenced by trends and short term market fluctuations.
Knowing about historic trends and patterns can keep you safe from making the same mistakes yourself. Being familiar with the patterns which occur in various economic cycles can help you to protect your investments from being subjected to the boom and bust elements of the past. Don't allow your emotions to get the better of you and cloud your judgment. Get rich quick schemes rarely pan out and are better suited for the craps table in Vegas than your investments.
Educate yourself or seek the advice of a professional tax advisor when making any investment moves having either short or long term tax implications. Tax strategies should figure prominently into your investment planning as you will want to balance both your pre-tax and after tax retirement accounts.
Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.
"I am addicted to Bloomberg TV" says Nancy.