Investments Need Not Be Bad All The Time

Investments Need Not Be Bad All The Time

Have you begun to plan for your retirement? You may be thinking “How in the world is that possible with all of my debt and bills?” However, everyone should plan for their retirement. Even if they start late, they should start as soon as possible when the stock market is going good.

It is a very good question that I am often asked. I will not waste your time proposing dumb answers, although I have heard many. And when I hear someone give one of them, I like to ask another question, namely “how much commission do you earn if I follow that advice?” There are in fact four four correct answers to the title question. Now that is getting your money’s worth!

With the Power of Compounding (another future article), the answer is: the sooner the better. Just like the answer to “when is the best time to plant a tree?” (the correct answer is 20 years ago), we can settle for now as being next best. Sir John Templeton says compounding is simply the interest, dividends, or gains you earn on the earnings from prior years. A simple example: if you earn 12% per year (realistic) on an investment of 100, your total after ten years is not 220 (100 + (10 x 12% x 100)), it is 310.6. And that same 100, earning 12% after 50 years, will be worth 28,900. Try the calculations! Each year you earn 12% on not just the principal (original amount) but also the earnings accumulated over the prior years.

Income protection safeguards your retirement fund in two ways: it allows you to continue saving or at least prevents you from unnecessarily depleting your retirement savings. Being unable to work can have a crippling effect on your contributions. Those without insurance are tempted to withdraw from their retirement plans, even if they incur penalties. Income protection safeguards against employment interruptions, which can lead to retirement fund depletion.

Your goals will be determined by your needs; this will be done whether it is by you or your financial advisor. You will need to factor in current income, living expenses, debt, bills, lifestyle, and what goals and dreams you have for your lifestyle after retirement. You will need a certain amount of savings and investments to realize your retirement needs and wants. There should also be a cushion in cases of emergency, illness, death, or any unforeseen circumstances. There is no better time than the present to begin saving for the future. It is necessary to prepare for that and more. You can also factor in what you will be receiving from social security benefits; however, this should be the amount with the least importance. It is rarely enough to live on, and it should be used as part of the extra and cushion factor.

Sir John Templeton was the person who pioneered the investment fund business in the U.S., and later the concept of global investing, before most Americans knew there were other financial markets. He lived his later years living comfortably in the Bahamas. He is one of the real gentlemen of the investing industry who invested other people’s money (and his own) very wisely. The first insight seems obvious – if you do not have money you cannot invest it. If that fits your situation, then you should make sure you do not miss an upcoming article on saving and investing. Even those who buy on margin, or sell short, need some money to do this. The other aspect of his response is more subtle – implying that if you do have money, you should be investing it. Sir John was a long-term investor who was very optimistic about the prospects for the world. I can almost hear him say, “there is no time in history where people were as well off as they are today.”

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