A few weeks ago, we explored three crucial retirement mistakes that pensioners often encounter during retirement so you can make more informed choices.
In the same spirit, we have looked at 2 more retirement mistakes to avoid so you can ensure your retirement years are marked by financial stability and peace of mind.
Retirement Mistakes: Trying to time the market
Market corrections, drops of around 10% to 20%, can strike unexpectedly and end swiftly. Conversely, bear markets, declines of 20% or more over an extended period, often creep in without fanfare. Bear markets hinge on fundamentals, while corrections stem from sentiment and can happen rapidly. This makes market timing challenging even for seasoned professionals.
For long-term equity investors, the prudent approach is to remain invested. Sitting out could mean forfeiting vital upswings, leading to significant opportunity costs. Since 1983, the MSCI World Index has surged by 1,302%. However, missing the ten best days within that period nearly halves the cumulative return.
Before you try to time the market, reflect on the words of legendary US investor Benjamin Graham: ‘In the short run, the market is a voting machine, but in the long run, it is a weighing machine.’ Daily, weekly, and monthly market shifts are typical ‘votes’ with fleeting effects. In the long term, the market excels at assessing value, a function rooted in fundamentals.
Retirement Mistakes: Risking too much
Not many would risk going to Vegas and putting all their money on a dice roll. Even if the reward for winning is huge, the chances of success don’t outweigh the risk of losing everything. Surprisingly, investors often find themselves in similar situations, although not as dramatic. One common instance is putting much of your retirement savings into your company’s stocks. While you might believe in the company and feel loyal, investing much of your money based on emotions might not be the best choice for your family’s future. There are many cases where companies that were considered bulletproof have collapsed unexpectedly. Not putting too much of your money into one company’s stock is essential.
Another risky move is investing much of your retirement money based on a tip or a promising new company. This is dangerous for a few reasons. Firstly, if you know something, others probably do, too, so the market likely already considered it. Secondly, “sure thing” investments can be scams. Thirdly, you may just be wrong. Making big bets is tempting, especially if you’re trying to catch up on savings or trust the person giving advice. However, mixing emotions with investments can lead to regret.
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In short, the message stays the same: stop trying to time the market and look at the long term, which will help you avoid retirement mistakes.
Remember that you don’t have to navigate this path alone. Our expert investment advisors are here to guide you every step of the way to ensure retirement mistakes are avoided. Secure your financial future today by reaching out for a personalised consultation.