Different investments behave differently during different times. As an example, when the real-estate market was booming in the ‘70s, the stock market had some of its worst years. Large-cap stocks were the top performing asset class in the late ‘90s, but did poorly in the 2000, 2001 and 2002 years. Halfway through 2003, large-cap stocks (growth and value) were up substantially. At times, the … [Read more...]
An informed investor needs to establish his or her personal expected reasonable growth rate of return. The general rule of thumb is that if you take the percentage of decline tolerance (how much money you could stand to lose) in a given quarter that you are comfortable with, divide that percentage in half, and add a money market rate (typically 1 to 2 percent), the result is a reasonable rate of … [Read more...]
When we ask 401(k) participants how much money they want to make with their investments, they always say “As much as I can.” Everybody thinks they would love to be ultra aggressive. Who wants to make three percent per year? Everyone wants to make 15 percent, but most don’t understand the amount of risk they may have to take to get 15. This is where participants get into trouble. You have to think, … [Read more...]
Some people think that the money in 401(k) plans is insured against loss. It depends on what kind of loss you are talking about. Federal law requires that trustees of plans be bonded by an insurance company, which reimburses the trust in the case of fraud, embezzlement, or other criminal activity. However, your money is not protected against investment losses. Contrary to some beliefs, the Federal … [Read more...]
Many participants in 401(k) plans have no investing experience. Few have ever read the academic research of investing, some of which has won the Nobel Prize. What little information they do have comes from television, newspapers, magazines, or co-worker conversations. Most of this information is misguided or sensationalized and lacks any foundation. Many false ideas are so widespread that the … [Read more...]
Start being responsible by becoming a saver. The steps you take now will lay the groundwork for the lifestyle you will enjoy later. If you want to enjoy a future that is free from financial worries, your first step is to start saving today. You can start small, really small, but be consistent. You’ll be encouraged by how quickly your weekly or monthly contributions add up. Challenge yourself to … [Read more...]
When you understand this fourth ingredient for success, you will find yourself wonderfully prepared for life. Have a plan that works. Why is this simple ingredient so important? Planning is knowing where you are today and where you want to be tomorrow. And you do this buy breaking your dreams down into components and phases. You set realistic goals that reflect the component parts or the phase. … [Read more...]
#3 Place the framework: Network with financially insightful, and financially secure individuals who will help guide you toward your retirement goals.
Many people worry about what others think. And when you operate like this, you’ve just given your power over to others. People frequently make major decisions about their own lives based on assumptions about what their friends or family might think. Unknowingly, they’ve appointed these people as the designated drivers of their lives. Have you ever been around people who have expectant, positive … [Read more...]
#2 Lay the foundation: Decide the expenditures you’re willing to eliminate in order to reach your retirement goals.
Reschedule your life to start doing the things that build your future. Stop making excuses and start making it happen. Yes, this is a lot easier said than done. It’s a huge mental transaction to move from chasing dreams to learning to make decisions based on facts. We get blinded into believing there are no alternatives. Take a step out of your life and look around. Is there really no one doing … [Read more...]
Be absolutely clear about what you want out of your life before you decide what you’re willing to put into it. Why is it so important? Because getting clear about your future creates focus, energy and passion. That creates purposeful living and becomes a compass that gives you your heading when you get lost in the fog of emotion. In any life endeavor, there are going to be moments when you … [Read more...]