There's no shortage of “sure-fire” schemes
to get maximum returns with a minimum investment. But the truth
is, these schemes rarely live up to expectations.
There are, however, some
time-tested strategies that can help you make the most of your
investments and achieve your retirement income goal. Here are
four.
Start early It's never too early to start saving for retirement. In fact, the earlier you
start, the less you'll actually have to set aside to achieve your retirement
income goal. That's because the earlier you start, the more time there is
for your money to grow.
On the flip side, the later you start, the more you'll have
to save later to make up for lost time.
For example, contributing $100 a month for 30 years will give you
almost three times as much as investing $100 for 15 years (assuming
an 8% investment return). This is in part because you are contributing
longer. But it's also due to the power of compounding. Compounding
simply means earning income on the investment income you've already
earned.
Diversify You may have heard the saying “don't put all your eggs in one basket.” It's
a saying that applies to investing. By investing your money
in different investments, you can minimize the impact of a
decline in any one asset.
There is a certain amount of diversification built into each of the five portfolios
offered by Silver Thatch. Each portfolio holds a variety of different assets,
in many cases from different geographic regions and/or economic sectors (i.e.,
manufacturing, financial, government).
That said, you may want to divide youra dditional voluntary contributionsamong
two or more Silver Thatch portfolios – just to be sure. But don't get
carried away. Too much diversification can dilute positive returns and make
it more difficult to monitor your investments.
Asset
Allocation This simply means the amount of your money that is in stocks (which provide growth
and return), bonds (which provide a more stable investment) and cash (which is
there to meet short term needs and allow quick investment decisions). Research
has shown that the asset allocation contributes as much as 90% of how much investment
return you earn rather than the individual stocks or bonds that you choose. That's
why the Profiles approach to managing your benefit is particularly effective
for you. It recognizes that your needs and risk tolerance change as you progress
through life and Silver Thatch adjusts your asset allocation to match you along
the way.
Dollar-cost
averaging This simply means investing smaller
amounts of money on a regular basis, rather than in bigger
lump sums. Using this strategy, you end up buying more portfolio
units when values are low and fewer units when values are high. (That's a good
thing – you want to buy low, sell high.) You also want to avoid jumping into
the market with all your money just as unit prices peak.
Silver Thatch
makes dollar-cost averaging easy. It allows you to contribute
a set amount each pay period. In fact, you can contribute as
much or as little as you want – or nothing at all.
Review and rebalance Things change – including our investment
goals, risk tolerance, financial circumstances, and investment
mix. So, it's important that you review your investment choices
on a regular basis (i.e., at least annually) to ensure they still reflect your
investment needs.
When reviewing
your investments, keep in mind the following
Your asset mix can shift – on its
own. This can happen if you have AVCs in more than one portfolio
and one portfolio out-performs the other.
A change in financial circumstances,
marital status, or even your health can affect your risk
tolerance and retirement plans.
As you near retirement, you have less
time to recoup any investment losses. With that in mind,
it probably makes sense to gradually “shift” your investments
to more conservative, less risky portfolios.
Remember, investing is
a life-long process. You need to start early, invest wisely,
and review your investments regularly. Ultimately, it's your
money and it's up to you to make the most of it.
