5. Rebalance yearly
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Suppose you decide to put 60 percent of your savings in the stock market. As time goes on, some of your investments will grow faster than others, and some may lose value. This will cause your 60 percent stock allocation to change.
So once a year you should adjust, or rebalance, your portfolio so it has the right balance of allocations again. This task can be done in 15 minutes.
6. Keep emotions out of investing
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One common rookie investor mistake is reacting emotionally to stock market ups and downs. If you pulled out of stocks after the 2008 crash, for example, you may have missed the gains from the bull market that followed. Remember: You are in this for the long haul.
Euphoria and overconfidence are dangerous, too. Buying stock in a particular industry or sector that’s in the news can land you in trouble. By the time you’ve heard of a trend, it may well have peaked.
For more on the subject, read: “The Stock Market Is in Nosebleed Territory — Should I Get Out?”
7. Stay the course
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The easiest way to grow a sizable retirement account is to start young and save and invest steadily and consistently. The editors at Kiplinger’s Personal Finance say:
“Over the long term, we think you can reasonably expect an average return of 7 percent to 9 percent per year on your investments. … You won’t make it every year, but that’s an achievable range if you plan your approach thoughtfully and stick to your plan.”
8. Build in discipline
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Put much of your investing program on autopilot or follow a routine. This means:
- Having workplace retirement fund contributions deducted automatically from your paycheck.
- Setting up bank accounts such that money is routinely moved into investment accounts automatically.
- Rebalancing your investments annually.
9. Get every bit of your company’s 401(k) match
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If you are unsure whether your employer matches 401(k) contributions, ask the human resources officer. If the company does match your savings, learn its maximum matching amount.
Suppose your employer matches your contributions to your 401(k) account dollar for dollar up to a maximum of 4 percent of your $4,500 monthly salary. That’s $180 you can get free every month — $2,160 every year. To earn the company’s match, you’d need to put $180 in the account every month, too.
To learn about maximizing your contributions to a workplace retirement account, check out “Ask Stacy: How Much Should I Contribute to My 401(k)?”
10. Contribute as much as you can
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Matching your employer’s contribution is just a beginning for your retirement savings. To get an idea of how much money you should be saving for retirement, use a retirement savings calculator. Try AARP’s, for example, or search online until you find one or two you like.
Set a rough goal for retirement savings, and keep increasing the amount of money you set aside for retirement until you are putting away enough to reach that goal.
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