Saving for retirement can only be achieved with a systematic and methodical approach. Rookie investors often fail to achieve the results they desire due to lack of rules or structure to follow. With the five investment strategies below, you can consistently hit growth milestones for your retirement nest.
1. Use Dollar Cost Averaging
Perhaps one of the oldest and simplest strategies for investing in any financial market or asset, dollar cost averaging involves the purchase of a specific investment with a fixed dollar amount. The gist of it is – the investor buys more shares when the price of the asset drops and fewer shares when it skyrockets. For example, let’s say the price of a stock is $10 and you allocate a fixed $100 to invest every month, you buy ten shares of the stock this month and the price jumps to $20 per share next month, so you buy five shares that month.
2. Maximize 401(k) and Roth IRA
Most people will tell you to invest in one or the other, but there’s no stopping you from investing and maximizing contributions to both retirement accounts. Current maximum limit on 401(k) contributions is $18,000 while Roth IRA or traditional IRA accounts can hold up to $5,500 in contributions.
3. Invest Your Spare Change
Coins are undervalued, but given enough time to accumulate, your $0.25 today can grow up to hundreds of dollars and pay your next trip out of town. And while it wasn’t possible to invest your spare change years ago, modern technologies, specifically mobile applications, allow people to automatically invest their spare change and buy fractions of stocks or exchange-traded funds. Some popular automated investing apps include Acorns, Betterment, and Robinhood.
4. Get Back to Basics
Long-term investing with the endgame of building a decent retirement nest can be achieved by the simple principle of investing regularly, specifically during your working and earning years. Create and stick to a sensible cash flow scheme. Be sure to regularly assess your financial progress and make any adjustments to correct any detrimental financial habits or a subpar investment portfolio.
5. Shut Down Emotions
Emotions simply don’t fit the investing realm. Base your investment decisions on logic and critical thinking. Avoid acting on water cooler recommendations or investing in a company out of sentiment. If a company’s finances or management team are lackluster, move on to the next possible investment idea. Remember, there are hundreds of companies out there that are publicly traded, added to the dozens of other financial assets and derivatives being offered by brokers. Now’s also the time to cut costs and nix emotional spending.
Final Thoughts
Having an investment strategy before even putting your first order is imperative to consistently making profits and, more importantly, avoiding huge financial losses. While one strategy might work for your friend or colleague, it may not necessarily work out for you. Choose a strategy that best complements your personality and attitude, risk profile, budget, and available time and energy.