My observations over the years have been that the majority of people really don’t have much of a plan or strategy for their investments. There are numerous reasons why this is the case, but I think the largest underlying cause is a lack of time. Work consumes a large share of time for an American compared to some other parts of the Western world. Family obligations are probably the next obstacle that interferes with peoples ability to spend more time caring for that important nest egg that needs attention.
In addition to the work and family issues, other causes of not having a solid financial plan are not being able to afford a financial planner, or possibly not finding a trustworthy candidate. For others, a lack of knowledge or interest about what to do to set up a portfolio of investments that can provide a positive return, or for some, just pure procrastination and putting it off for the future.
The consequences of this inattention to financial planning are that most of these people will fall far short of what will be needed for a comfortable retirement or they will wait till it is too late to be able to catch up on the amounts necessary for those golden years. A look at the statistics for the average savings for a person 40 years old proves that fact. Leaving money sitting in a 404k account with a previous employer for instance because you really don’t know what to do with it, or parking money in a savings account paying next to nothing in interest is not a good investment strategy.
This tragedy does not have to happen. Setting up a well diversified portfolio of funds that only need an annual re-balancing can be accomplished by just about anyone, even a stock market investing novice. If a person is willing to put just a couple of hours work into this investment strategy, they will have an excellent shot at achieving a goal of growing a retirement nest egg that they can be proud of.
Just the words, stock market investing, puts fear into some people, mostly because of a lack of knowledge of how the markets work or because of a previous bad experience. The truth is, stock market investing is the best way for achieving the types of returns necessary to grow investments that will meet the required levels of assets for retiring in the future.
Following a few basic rules of investing such as proper diversification and allocation of assets, can keep the risk levels for stock market investing at a very tolerable level. This same portfolio plan allows your investments to grow with very little attention or need for making changes. This will also prevent people who get a late start on their investments from swinging for the fences on some wild scheme trying to make up for lost time. That scenario will most likely end up with a tragic ending.
Everyone needs a plan regardless of the time demands they live under. Keeping things simple can sometimes be the best choice. What ever your situation, find some time to make a plan so when that retirement day comes, you know your financial security is taken care of.