Investing in the stock market is a great way to grow your money for retirement, but it can also be extremely nerve-wracking. The markets are always volatile, and there’s no guarantee that you’ll be able to ride out the ups and downs.
The truth is, there’s no perfect time to invest. There will always be an element of risk involved—no matter what your investment strategy is or how much time you’ve put into researching your portfolio. But with these tips, you’ll be able to reduce some of the volatility of the market so that when things do go down (and they will!), your losses won’t be as severe.
- Understand Your Risk Tolerance. Every investment has a level of risk which you must access based on goals, purpose and time. Its not to uncommon to think that you are aggressive when the stock market is doing well then all of a sudden become conservative when the market begins to decline. If retirement is a comfortable distance away (10 years or more) you shouldn’t get spooked by market volatility.
- Volatility Is What Gives You Returns. Let’s face it, traditional fixed investment are less risky because they are guaranteed. Guarantees have less risk, therefore less returns. The volatility in the stock market is what provides investors higher returns than traditional fixed investments. In addition, this volatility is superb for those making monthly contributions into your accounts.
- Use Mutual Funds and ETF’s. Stock picking is extremely difficult. In an ocean of 1000’s of stocks and bonds, its impossible to know which handful of them is good. In addition, most experts don’t know either. Mutual funds and ETF’s allow you to very large amount of stocks of many types providing a more diversified overall portfolio and reducing your overall risk.
- Rebalance Your Portfolio. As volatility affects the positions in your portfolio, its important to rebalance regularly as to not become more aggressive than you intended. This means you are selling your positions that have done well, and buying those that have not. Its the ultimate “buy low, sell high” on auto-pilot.
- Remain Focused. The stock market rewards investors generously who are patient and remain focused. Its not about TIMING the market but understanding that its TIME in the market that wins.
The best time to start investing is NOW! If you’re worried about timing the market, the truth is that there will never be a perfect time to invest—the economy will always be unpredictable, and there will always be highs and lows. But by starting now, you’ll be able to build up your investment over time, so that when the economy does crash again (and it will), you’ll have more money to help cushion the blow!
You want to talk further? Make sure to contact me and we can make sure you are on the right track.