Without wishing our lives away, many people out there find themselves waking up on a Monday morning with a sense of dread about them, knowing they must face yet another week at work. For them, retirement can’t come soon enough.
While there are plenty of people who enjoy their jobs/careers and look forward to a day’s work, for most people, retirement can’t come soon enough. The only problem there is the fact that expenses only seem to be going up, and pension plans aren’t what they once were, especially when the government has taken its cut. Because of this, more and more people are looking to the future and investing early for retirement.
Instead of retiring and living off of basic social security payments, savvy investors are investing early with the goal of retiring early. If this sounds like something you’ve been interested in for some time, here are 4 useful tips for investing for retirement.
1. Invest a Small Amount at a Time
If you happen to be blessed with a lumpsum cash injection, perhaps after selling a property or an inheritance, you may be able to invest a large amount at one time, then simply forget about it for a few decades, in the hopes of it growing. With compound interest, twenty, thirty, even forty years later, and you could be looking at a very handsome amount.
The problem here is that most people can’t afford the luxury of investing a large lump sum in one go. Instead, they may need to invest little and often. If this applies to you, then you could invest a small amount at a time.
With each paycheck, set aside a predetermined amount and invest it. There are plenty of apps and websites out there designed specifically for that, and doing so couldn’t be easier.
By investing a small amount, you won’t miss the money at the time, plus you’ll get a better dollar average as you’ll likely invest on both red and green days. $200 per month may not sound like much, but after one year that will be $2,400 you’ve invested. After 10 years, that’s $24,000. Don’t forget, you’ll be earning compound interest on top of that, which is basically interest on top of interest.
2. Try to Buy the Dip
Without sounding like we’re pushing “meme stocks” if you do have the disposable income on hand to invest, it’s certainly worth “buying the dip”. But what exactly do we mean by that?
Buying the dip is basically a term used to describe buying stocks and shares when they are down. If you invest in the S&P 500 for example, rather than investing on a good day when the market is up by 3% in the green, try to wait until a bad day when the market is down by 3% in the red.
When you buy stocks in the red, you’re basically getting more shares/units for your money. The more shares/units you have, the more money you stand to make as their value increases.
3. Choose Long-Term Growth Stocks
As you’re basically planning to help with your retirement, it’s always worth investing in stocks which are designed to provide long-term gains over the course of several years.
Stocks which provide long-term gains may not provide impressive gains in the short-term, on the plus side they’re considered far less volatile and have a much lower risk factor associated with them. These stocks should yield moderate long-term growth, without the risks of more volatile stocks such as Crypto for example.
Long-term growth stocks include shares in established companies such as Amazon, Apple, and Microsoft.
4. Invest in ETFs for Growth and Safety
While long-term growth stocks can be worthwhile investments, the major downside to investing in individual companies is the fact that you’re putting all your eggs in one basket. When the company does well, your investment will grow, but if that company suffers, your investment will fall.
To help mitigate some of this risk, consider investing in exchange traded funds, or ETFs, instead.
ETFs are made up of hundreds, if not thousands, of different stocks and/or bonds. Rather than buying individual shares, with ETFs you buy fractions of shares (units) in a variety of different companies. The great thing about ETFs is the fact that you’re not at the mercy of just one company.
Take the S&P 500 for example. You can invest in ETFs which track that index. That essentially means that, if the S&P 500 is up by 8% for the year, if you invested in an ETF which tracks that index, your investment would be up by 8% for the year.
ETFs are generally lower risk investments, and while the returns year on year aren’t as impressive, for long-term growth over the course of several years, if not decades, they can prove very safe and worthwhile investments. As an example, if you had invested $20,000 in the S&P 500 at the start of 2001, just over two decades later at the end of 2023, that $20,000 would be worth $110,662. That’s more than $90,000 profit, for doing absolutely nothing except waiting.
Disclaimer This is not financial advice. If you’re looking for financial advice, contact a professional. Only invest what you can afford to lose and always remember that the value of investments can fall as well as increase.