For most investors, retirement plans took a turn for the worse, specifically in the last few years. They are faced with more challenges and require more discipline when planning for their “nest egg.” Many can remember when they were able to focus on basic techniques such as saving and investing to earn a conservative return. Today, this is not the case.
There are many more factors when investing that are out of our control. There are more influences from our government, politics, financial institutions and international economies. There has always been and will always be a mixture of economics and politics that will affect our economy. However, in the last few years we have seen much more government involvement than usual. Monetary and fiscal policy, which for years have helped to navigate our economy, now play an even larger role. What does this mean for the individual investor? A lot. This requires more responsibility, planning and action from investors.
Investors’ risk today is substantial. We can, however, reduce some of our risk by keeping involved and planning appropriately for our retirement needs. Many of today’s risks include inflation, interest rates, the economy, markets, and now real estate. To reduce risk we must understand it. We then can begin to develop techniques and strategies to limit our risks. I would first recommend that you to seek the advice of a financial planner and have active communication with him or her regarding your goals and needs. I would like to point out that active communication is critical, so as an investor you can evaluate all of your financial decisions objectively throughout your planning process.
Recently, many investors have been tested on their strategies and techniques for investment planning. Hopefully, they can benefit from the downturn they have experienced in the last couple of years and learn from it. If investors pay extra attention and educate themselves about the risks of today’s market, they can prepare for future economic changes.
We will all certainly face new and unknown challenges in our future; systematic risk is unavoidable. With the right counsel and guidance, one can plan accordingly to avoid big mistakes in investing. These mistakes can be controlled, not by the performance of the investments, but by investor behavior.
Editor’s note: This month’s personal finance column was written by Michael Cochell, associate vice president at Jacob Gold & Associates Inc. Jacob Gold will return next month.
