By: Jesse Anderson
In my daily interactions with clients and potential clients, I get to hear the horror stories from their investment past. Hopefully, you haven’t made these same mistakes.
Here are the Top 5 mistakes I regularly hear from investors ready to retire.
Trying to Time the Market
We’ve all heard “Buy Low and Sell High.” In theory, that sounds simple; however, identifying peaks and bottoms is impossible. First, you must time 2 decisions perfectly, when to get in and when to exit. Even if you get one of these rights, you can still end up with a portfolio that underperforms over the long-term. Both investment professionals and individual investors have been trying to get this right from the beginning. Yet, no one gets these decisions right consistently.
No Defined Investment Plan or Strategy
Retirement is one of the biggest decisions of your life, EVERYONE should have a plan to prepare and live in this phase of their life. It takes a strong savings plan, solid investments, and the correct timing. These decisions should not be made on your own. You should have trusted advisors to consult for a second opinion or confirmation of your plans.
Investment Assets Don’t Match Portfolio Objectives
We find that most retirees have two common goals: monthly income and make their money last. However, their current investment assets may not match up to these objectives. When you start investing, you invest in a variety of assets for growth and accumulation. In retirement, you move towards a distribution and preservation stage in which your primary objective becomes income. Many retirees make the mistake of not modifying their investments to income producing assets when their objectives have changed. When the W-2 paycheck ends and the portfolio paycheck begins, you should adjust your investment approach.
Moving to More Conservative Assets
Older age doesn’t automatically mean safer investments. Too many investors make the mistake of being overly conservative with their investments and shifting from equity to fixed income. While bonds and other fixed income investments are income alternatives, retirees need income to keep pace with inflation. If the average rate of inflation is approximately 3%, that means the cost of what you purchase goes up about 3% each year. Retirement can be as much as one-third of your lifetime. This means retirees must have long-term objectives which can handle and require higher risk, greater reward investments.
Ignoring Investment Fees and Expenses
The financial services industry has built an empire on hidden, ongoing costs for their clients. Calculating your investment costs can be very difficult. Very few come in the form of a monthly invoice like you receive from a cable or phone company. An investor can easily pay commissions, expense ratios, and management fees to three different firms involved in helping with their investments. All these fees will add up quickly and cost you valuable return dollars each and every year. All investors should know and control the costs of their investments.
Are you ready to eliminate these common investment mistakes?
Our next Snider Investment Online Course will begin in the Fall and if you sign up here, we will notify you with additional details once they become available.
