There’s a good chance that you’ve already made some money in your retirement. You might have invested in stocks or bonds, earned dividends, or received income from a 401(k) or other retirement accounts. And while it’s never too early to start thinking about how you’ll use your savings in retirement—and what kinds of investments will help you reach your goals—it’s also essential to keep an eye on the big picture. Here are five common mistakes people make regarding retirement investing, including not seeking retirement investment advice from income security experts.
Not paying attention to fees
Surprisingly, many people ignore fees. Fees can add up over time, and they’re often hidden in the fine print of your investment account or offered as “free” services by brokers.
For example: If you have $10,000 invested in a mutual fund with an annual management fee of 1% on its portfolio value—$100 per year—that’s $1 per month for each year you own the fund! Suppose you have $50,000 invested in an individual retirement account (IRA) with no other fees and let it sit until maturity each year (or perhaps even longer). In that case, your total cost could easily reach several thousand dollars annually!
Investing in individual stocks
Investing in individual stocks can be a good option for some people, but there are better ways to diversify your retirement portfolio. This isn’t because there aren’t great companies out there that have experienced long-term success. These companies tend to be more expensive than other investments and may be too risky for some investors with a short time horizon or those concerned about market fluctuations over the long haul.
Investing too conservatively
When investing in stocks, you must be aware of the risks of being too conservative. While this may seem like a good thing—the more conservative your investment strategy, the less likely you will lose money—it can be detrimental if there is an unexpected downturn in the market or if your investments fall short of their goals.
Taking too much risk–or not enough of it
Folks can get quite excited about investing and forget about the risks associated with it. If you’re willing to take some risk, there are ways to build your portfolio that will help you reduce it over time while still allowing for moderate returns.
Here are two things every investor should know about risk:
- Risk is a component of investment returns–it’s what causes some investments to outperform others over time.
- Diversification across multiple asset classes (such as stocks and bonds) or within specific sectors, such as healthcare or energy, reduces risks.
Not seeking expert advice
You should consider seeking the advice of an expert. An expert can help you make better decisions regarding your retirement investments and other financial matters. Experts are often more knowledgeable than individuals with only a cursory knowledge of the industry, so they can give you insight into potential solutions that may not occur.
Find someone who has experience working in your field (for example, someone who has worked as an investment advisor) to help guide you through the process. They will be able to tell what mistakes were made by other investors in similar situations.
However, if you need clarification on the entire thing, it’s better to seek retirement investment advice to ensure you’re safe. While it may seem like the retirement game is all about saving, investing, and planning, these top mistakes can trick you into falling prey to many money problems.
