Many investors, namely Warren Buffett, refer to individual investing as the “Wall Street Casino”, meaning that investors are playing against the house and are bound to lose. Buffett’s point is that online trading has given casual investors a false sense of security in investing, and that old-school investing, which involves choosing investments after careful research and balancing them within a portfolio, has fallen to speculative day trading that’s held up by nothing more than a hot tweet. Investors are churning stocks, seeking a quick payday without considering the long-term pitfalls of such an approach.
Beyond the Odds – Reclaiming Your Financial Security
Trading for fun certainly has its place, but investing for your retirement requires a more measured approach. Investing for your future should consider several factors: what’s your retirement horizon, what’s your desired standard of living, and how balanced is your investment portfolio?
Deconstructing the “Wall Street Casino”: Where Your Nest Egg is At Risk
One thing to remember: Wall Street thrives on trading, and it’s a very egalitarian concept that anyone can trade. Buffett cautions that there’s an inverse relationship between how easy trading has become and how difficult it is to grow wealth; primarily because so many investors base their choices on the hot tip of the day. Without experienced guidance, most investors lack the patience and the resources to find and research the best options to protect their retirement savings.
Aside from market fluctuations, what are some of the financial risks for retirees?
Inflation is certainly a market uncertainty, but in general, prices go up, and the cost of living increases. Health care costs also rise over time, and policy changes can increase those expenses as well. And finally, how long do you and your spouse plan to live? We all hope for a long, happy, and productive life, but as people are living longer will your nest egg last as long as you do?
Managing post-retirement risk
Post-retirement risks are potential pitfalls to financial security unexpected expenses or a lower-than-planned income. The death of a spouse, illness, the economy, and even changes in public policy can have a negative impact on retirement income. When you are investing for the future, don’t forget to plan for the unexpected dips.
Foundations of Financial Freedom: Principles for a Protected Nest Egg
How can you protect your nest egg from unforeseen financial pressures? A well-balanced investment portfolio is meant to keep your cash flowing regardless of outside influences. Diversification is the baseline for such a portfolio of investments chosen to provide income in any circumstances. It is an economic fact that certain sectors rise as others fall, but determining the best options for your goals does take expertise and experience.
A second pillar of financial freedom is sequential risk. This is understanding how to manage withdrawals so that your overall portfolio doesn’t suffer. Retirees seldom contribute additional capital to their retirement accounts, so it’s important to preserve as much capital as possible so your income stream stays steady. Your financial advisor can design a withdrawal schedule that gives you the best of both worlds: cash flow and capital.
Retirees live in three speeds: the go-go years, the slow-go years, and the no-go years.
It’s common for new retirees to spend more. There’s time for hobbies and travel and new experiences, your living costs are still at pre-retirement levels. Most retirees downsize homes, travel less, and simplify living in the slow-go years, and cash flow needs lessen somewhat. The no-go years often require more of an income stream as health care costs have more of an impact.
Taking Control of Your Financial Future
You don’t have to figure out your retirement planning on your own. At The Prosperity Group, we’re here to help you identify your goals and navigate the path toward them. We take the time to understand your needs and help you prepare for every stage of retirement so you’re ready for whatever life brings. Contact us today to get started, and check out our YouTube channel for helpful retirement tips and insights!