1. We all need to develop a long-term plan to prepare for retirement. Social Security and company pension plans may not be enough to enable us to live comfortably.
2. Each year that we put off investing makes it that much harder to reach our goals. Generally, for every five years that an investment program is delayed, to achieve the same retirement income, the amount that must be invested each month doubles.
3. Over the long-term, stocks have outperformed all other types of investments. From 1926 to 2020, stocks, corporate bonds and government bonds have returned 9.8%, 7%, and 5% annually, respectively. Over 30 years, $1,000 invested at 9.8%, 7%, and 5% would be worth $16,522, $7,612, and $4,322, respectively.
HOW SHOULD I INVEST IN THE STOCK MARKET?
1. First, choose investments that offer a risk/reward that you are comfortable with. Generally, stocks have a medium to high risk/reward, bonds offer low to medium risk/reward, and money market instruments offer low risk/reward. 2. Diversify your portfolio in order to reduce risk and volatility.
3. Invest for the long term, in down markets as well as up markets. The risk in common stock investments has historically, through mutual funds or a diversified portfolio of individual stocks, has historically been reduced the longer one is invested. Note to remember: Past performance is no guarantee of future success.