1) Constantly worry about news headlines and how they impact the value of your investments.
If you are 10, 20, 30+ years away from retirement and you are worried about what is happening today, you are already destined to fail. To invest for the long term one must be optimistic. The problems we are dealing with today have been dealt with in the past. There will also be new problems that arise in the future.
2) Buy and sell based on emotion with no plan in place.
Markets move based on emotion. People are greedy at the top, and fearful at the bottom. The saying ‘buy low, sell high’ is a lot easier said than done. Pulling the plug on your investments requires not just one decision, but two; when to sell and when to start investing again. The likelihood of an individual timing the market perfectly is slim and you have to do it twice.
3) Invest too conservatively at a young age.
Long time horizons allow you to take on more risk. Higher volatility is the price you pay for higher returns, but at a young age you have time on your side. You have the opportunity to earn more, to save more, and to take advantage of long term growth. The longer your time horizon, the more likely you are to earn a positive return on your investment.
4) Borrow from tomorrow to spend today.
If you can’t get your spending under control you will constantly be playing catch up. Saving for the future is all about developing good habits. Spend less than you earn and save the difference. Keep some money set aside for emergencies and bigger ticket purchases. If you have high interest debt (credit cards or personal lines of credit), work on paying that down before you begin to invest.
Setting yourself up for retirement isn't about being perfect. You just have to minimize mistakes and keep heading in the right direction. Every small decision you make will compound over decades. Make good decisions and they will yield good results. Billionaire investor Charlie Munger famously said “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”.
If you have any questions or would like to discuss the topics mentioned in this blog, please do not hesitate to reach out here.
To receive notifications when we post new content, sign up for our reading list here.