Let’s Set Your Course For Retirement

May 2, 2023

The question of whether there will be another market panic is not “If” but “When”. The financial markets are constantly changing. This can make it difficult to understand how to use them to prepare for retirement. In this article, I will explain five strategies to help you set yourself up for retirement regardless of market fluctuations. Having strategies that you follow in the good times and the bad is the difference between a successful plan and just throwing spaghetti at the wall and hoping it sticks.

#1: Use Time To Your Advantage

Investors who stay mindful and maintain perspective of their investment time horizon have a better chance of reaching their financial goals than those who react to short-term market fluctuations. Your investment time horizon refers to the amount of time from when you begin investing to when you start selling your investment. For example, a 25-year-old who is not retiring until 65 would have a 40 year time horizon for their retirement accounts. Your time horizon is not the only factor for the construction of a portfolio, but it is very important.

#2:  Maintain Discipline

In today’s era financial news is abundant and constant. Many investors try to use this high frequency data to gain an edge on the market, but most are reacting and end up worse off than where they started. Reacting to short-term market “noise” by making dramatic portfolio changes can have a negative impact on achieving your long-term financial goals. History shows that by maintaining discipline and perspective during market downturns a patient investor will often be the one rewarded when markets return to the upside.

#3: Diversify Your Portfolio

The golden rule of investing is diversification. Diversification can help reduce the impact of market volatility on your overall portfolio. Diversification means including a combination of investments from different asset classes such as cash, bonds, and stocks. To take this one step forward it’s important to also diversify in different industry sectors, geographic regions, and investment styles. The reason diversification works is because financial markets do not move in concert. Thus having a diversified portfolio allows you to participate in part of the gains of the ones in an up market and reduce your losses in the ones experiencing a down market.

#4: Regularly Balance

Market fluctuations, good or bad, can often cause a shift in how the different investments in one’s portfolio are divided. Therefore regular rebalancing is needed to return the portfolio to its proper investment division. For example, if a portfolio was 60% stocks and 40% bonds but stocks outperform bonds, the portfolio may have increased to 70% stock and 30% bonds. In this scenario, rebalancing allows you to return to your original 60/40 while taking profit from the stocks that went up and reducing risk if they were to go down in the future.

#5: Invest Regularly

Investing a fixed amount on a regular basis helps make sure that your investment strategy remains a priority through all types of market conditions. The best thing to do is to set aside a fixed % of your monthly income to be devoted to your retirement accounts. Then contribute that amount automatically on a systematic basis. This not only creates a habit for saving but turns a discretionary item into a “bill” which will make your saving more likely to continue during times of market turmoil.

Setting up your path for retirement can be a daunting task but we are here to help! Everything described in this article are things Greenberg Financial Group is specialized in helping with. Our main goal is to educate and serve. If you need help getting started, updating a financial plan, or analyzing your investment portfolio give us a call at 520.544.4909 or go to our website www.Greenbergfinancial.com to learn more!