Posted on April 12, 2017 in

Common & Dangerous Investment Mistakes

Investing for retirement is a marathon of tiny steps to reach a finish line. Along the way, it can be easy to make mistakes and get sidetracked which can derail your financial plan. It is imperative to follow your plan and speak to your advisor when you are concerned. If you do not have a plan, it is easy to fall into one of these traps.

Investing without long-term goals

Goal setting is one of the most crucial pieces of financial planning. Unfortunately, it can be one of the most overlooked. Setting a goal is identifying a finish line, or break point along your financial path. If you’re in your early 20s, your first financial goal could be to build up an emergency fund so that you can afford unforeseen expenses. Shortly after that, possibly a house, or investing for your children and yourself. Don’t be afraid to set several sequential goals, just set realistic goals. Then write them down and share them with your spouse or your trusted financial advisor. Writing down your goal and sharing it keeps you on track. Completing a small goal is gratifying, but it also builds a bigger financial picture. It allows you to stick to your financial plan through difficult times because you reach certain points and accomplish a task. Check the status of your goals at least annually with your trusted advisor and spouse and make adjustments as needed. Underestimating your time in retirement

How long will you live for? If you can tell me that, I can plan your retirement almost perfectly. Unfortunately, not many individuals know how long they will live for and will often underestimate their time in retirement. If you think you will live to 85, plan for 95. If you think 95, plan for 100. Along with that, you need to also consider your spending habits. Our research shows individuals will continue to spend the same amount in retirement as they were previously. Add in inflation and you could risk outliving your money. As we begin to live longer than previous generations, our time in retirement may exceed the time we spent working and building our retirement pile. Planning for a longer retirement is important to ensure you don’t outlive your money.

Making emotional investment decisions

Invest to meet your financial goals. Put your blinders on and follow the path you created with a trusted advisor and planner. The stock market has proven resilient through the past 100 years. We have faced two world wars, a massive economic depression, the cold war, rising inflation, the tech bubble, and the most recent economic crisis of 2008, yet the long term performance of the stock market exceeds 7% in real terms. The market will inevitably turn lower, but it will inevitably roar back just as it did after the depression in 1929 and recession in 2008-09. Market down years should be viewed as blockbuster sales on the best assets in the world: US Companies.

Your financial plan is your roadmap, and could be one of your most prized possessions. Your plan represents your path towards financial freedom. Making quick and dangerous investment decisions can derail and delay your financial freedom by many years. Speak to your trusted advisor at least once a year about your plan. If you are concerned, contact your advisor sooner. Your advisor works for you, and should be able to discuss each step of the plan with you when you need it. If you don’t have a plan, contact a trusted advisor to help you craft one.