From our first day on the job, we should be thinking about retirement. Not necessarily because we don’t like our jobs, but because the best way to be financially prepared for retirement is to start working toward that goal from the very beginning.
For some workers, a pension is in place and will support their financial needs in their golden years. However, many employers do not offer such a program, and even for those that do, recent issues with the financial stability of pension funds around the country have many people thinking about backup or secondary plans for their retirement.
Investments are the usual tool for achieving this financial security, with or without a pension. These come in many forms, ranging from government-backed securities like bonds to public stocks. Whether you’re looking to shore up your retirement or simply want to know how to invest extra money, you should think about some of these factors.
Do You Know Your Tolerance for Risk?
Investing is very different from saving. With saving, you put your money in a secure account and it draws some small amount of interest. Most notably, it never loses value. In addition, you can withdraw it at any time without penalty.
Investing means placing your money in some type of stock or mutual fund. Growth is likely, but particularly in the short term, there can be a loss of value. Investors who panic and sell during those low points will lose money. If you can maintain a steady hand and ride out the market’s highs and lows, you will see positive growth.
You Can Identify Good Advice
There is a phenomenal amount of advice out there, some good and some bad. If you choose the wrong source, your investments–and your financial future–can be ruined.
You must be able to research not just your stocks, but also the sources of information on your stocks. Who is credible? Who has experience, knowledge, insight? You must know who will guide you reliably and accurately without working to feather their own nest. If you can do that, you have a good chance at a successful investment experience.
You Are Patient
Investors can be as active or as passive as they want, and while there are some investors out there who micromanage their investments, your goal as an investor should be to have positive growth without constantly checking the market or reading up on your holdings.
While there is always the possibility of greater returns with “day trading” and short-term moves, you must be able to sit back and, in large part, leave your investments alone. There are several reasons for this, but the most important ones are that you don’t always have the information to make a good move, and that you can easily lose money.
Investors form the backbone of the economy. They provide capital to companies to help fund expansions and innovation, creating jobs and generating economic growth. As an investor, you area part of that backbone, but it’s essential that you understand your role in the equation and how things are done.
Without question, there is always opportunity in investing. With a good assessment of yourself first, you can take the first step toward funding your future.