Common-Sense Retirement Investing

Create the life you desire

Your sunset years are ahead.  Start planning now! (Photo:

Start planning now for your sunset years (Photo:

In this last article of the retirement series, you will learn how to create a sustainable lifetime income without having to resort to annuities or credit cards. You desire to live well and maintain your standard of living in your retirement years, but you do not know how to do it without depending on what may be shifty advice from a broker or financial advisor. It’s time to put some common sense into your retirement investing. Follow these strategies and you will be well on your way to creating the life you desire.

Start as young as possible

The younger you start investing in your retirement fund, the more you will be able to make in the long term. However, it is human nature to put this off until the last possible minute. This is not advisable…let me tell you why. Say you start investing when you are 25 years old, and you put in $10,000 in a retirement account with annual additions of $5,000. Your interest rate is a generous 6% compounded annually. In 40 years when you reach 65, you will have $923,095.60. Pretty impressive, right?

But what if you wait 10 years? At 35, you start with the same amount of principal, and the same amount of money added annually. Everything remains the same, except you only have 30 years instead of 40. Now, you would only have $476, 443.30. That is a LOSS of almost $500,000!! OUCH! And what a big loss!

The point is to start as soon as you can, so that you can save as much as you can by the time you are ready to retire, without the need to rely on credit cards consistently in your golden years.

No need for over-diversification

Warren Buffet once said about people who spread out their investments in an effort to diversify, “Only people who do not know what they are doing diversify.” And yet, financial advisors who are supposed experts tell you to diversify all the time in order to “spread out the loss”. Of course, in reality, you are spreading out the profits you could be making. The reason is that when you have more money in a stock, you own more shares. The more shares of a company that you own, the more money you can make when the share price skyrockets. Of course, the opposite can be true: The more shares you own, the less value those shares represent when the share price bottoms out.

Over-diversification means that you have a little money here, a little money there—all earning just a little money everywhere. However, if you put more money into fewer investments, your money has the potential to grow higher and faster. The key to success with this is to thoroughly research companies and hold on to your shares for the long term.

Buy low, sell high

You must buy when everyone else is selling, and sell when everyone else is buying. Basically, buy low and sell high. This is the logical way to invest.

When the market is in a downturn, you can buy more shares for less money when everyone else is losing out on a golden opportunity. When everyone else is thinking that it is the perfect time to buy shares as the market experiences its highs, this is the perfect time to sell or hang on to your shares. But never buy during this time! (You may regret it when you run out of cash and need to use your credit cards for basic survival!)

Don’t believe your broker ALL the time!

A man invested $10,000 in 1965, on the advice of his broker. Shortly after he invested, his broker suddenly dropped dead of a heart attack. Well, the man didn’t get any “advice” about when to take out his money, so he held on to his shares for about 35 years. At the end of those 35 years, his investment was worth over 2 million dollars! Imagine if his broker was still alive and told him to take out his money when the market had gone down during that time!

The point is, many financial advisers and brokers tend to go with the emotional flow of the popular sentiment, rather than requesting logic to investing. Their clients then adopt this viewpoint. Not every adviser or broker does this, and you can get some pretty good advice from them occasionally. However, do not believe your adviser or broker all the time. Instead, take control of your future!

Other recent posts by bryanh