Diligent saving is the single most important thing you can do to improve your retirement prospects. But investing can be a close second, if you go about it the right way. Here are four tips that can help you avoid common investing errors, build a larger nest egg during your career and increase the odds that your savings will be able to support you the rest of your life after you retire.
1. Ignore the market prognosticators.
One of the biggest mistakes you can make is taking your cues from the legion of Investing Chatterboxes. You know, that horde of self-appointed investing gurus who populate the internet and the airwaves and jabber away about which direction the market is supposedly headed, which investments you should buy or sell and whatever other usually meaningless factoids flitter through their heads.
The problem is that their nonstop nattering can distract, confuse and mislead. Remember how all the putative experts were spouting gloom and doom about the outlook for stocks when the market got off to a shaky start for the year and was down 11% in early February? Funny how instead of tanking, the market rallied and actually finished the quarter with a slight gain. And when it comes to bonds, the supposed seers have been just as clueless. Far from the Armageddon pundits have been predicting since at least 2011, the broad taxable bond market has gained almost 4% a year the last five years.
That’s not to say that both stocks and bonds won’t take a hit at some point. I’m sure they will; markets don’t go up in straight lines. But if you base your investing decisions on the pronouncements of the chattering class, you’ll spend a lot of time spinning your wheels and making often needless and potentially costly moves that will likely detract rather than add to your portfolio’s performance.