Investing For Retirement – Managing Investment Risks

When it comes to investing over the long term, investing too cautiously might be the biggest risk you can take. Here’s why: over the past 50 years, the Standard & Poor’s 500 stock index has returned an average 11.8 percent a year with dividends reinvested, says Ned Davis Research. Long-term government bonds have returned 5.2 percent. Investing cautiously could cost you hundreds of thousands of dollars—the difference between retiring comfortably and having to accept a lower standard of living in your old age.

When you’re young, invest heavily in stocks. As you near retirement, begin moving more of your money into bonds and other income-producing investments.

But remember, even when you reach retirement age, you still may have 10, 20, even 30 or more healthy years ahead of you. “Americans can now expect to spend up to one-third of their lives beyond retirement, with many of those years in good health,” says Phyllis Moen, Cornell University, Ithaca, New York.

If your goal is to have enough money to live comfortably throughout your life, you’ll still be investing a good portion of your assets in growth-oriented stocks even after you retire.

Stocks – Steady as she goes

The jittery stock market has everyone guessing. Are we in for a long downturn, or is this a temporary blip that will be followed by future gains? The problem is, no one knows. It’s important to keep the long-term picture firmly in sight and ignore the day-to-day peaks and valleys.

Buy stocks now, invest some every month, increase your investment when you can, and you will gain when the market gains, which it seems to do on a pretty consistent basis.

Don’t try to time the market, jumping between stocks and bonds at every turn. It’s natural to want to jump out of stocks after the prices start to fall and jump back in after they’ve begun to rise. Avoid this temptation. Unless you have a high degree of confidence that something fundamental has changed about your stocks or the economy as a whole, hang on to those stocks you bought for the right reasons.