Building Wealth Investing for retirement is difficult...
Keeping a constant eye on the markets, studying economics, staying on top of every trend without a misstep... that's time-consuming and confusing.
Worse, a lack of guidance, poor websites, and limited investment options make most individuals' first foray into investing overwhelming.
But you can't hide from it. No one is going to rescue your retirement for you.
The good news is it doesn't have to be so tough. As you'll see in today and tomorrow's Retirement Millionaire Daily, there are just three keys to understanding your retirement account. Learn these, and you will truly change your quality of life in your retirement...
Let's get started...
There are three big things you need to earn an extra six figures in your retirement plan...
- Asset allocation
- Low fees
- Index funds
Today, we'll cover asset allocation...
[optin_form id="286"]
Asset allocation means how you divvy up your capital among several categories of assets. Changes in the market get smoothed out by the diversified nature of your portfolio... leaving you to sleep well at night.
The key is doing it from the start and sticking to it.
First, you should set aside some cash for emergencies... Then, start with a simple allocation: Decide between stocks and bonds. If you have a longer-term view and a high tolerance for risk, you might make your allocation 80% stocks and 20% bonds. If you are closer to retirement and don't like volatile returns, you could do 30% stocks and 70% bonds.
Most of us fall somewhere in between those extremes. When someone is starting off, I suggest using a "middle of the fairway" asset-allocation plan: 60% stocks and 40% bonds. It ensures you will harness the proven wealth-building power of stocks... while also using the conservative, income-producing power of bonds.
The point is to combine assets, like stocks and bonds, that are not perfectly correlated (meaning their price movements are not closely related to each other). Blending them in a portfolio smooths out your total returns.
As you get closer to retirement, you can adjust your allocation to match your risk tolerance. For example, you can use the "60/40" asset allocation while you are in your 40s, 50s, and 60s... and then start increasing your allocation to bonds when you reach your 70s.
Once you are comfortable with that basic stock-bond allocation, you can start to get more complex, dividing your categories among, say, domestic and international stocks. Or you can divide your bond allocation among corporate, federal, and municipal bonds. You can also add a small allocation to precious metals, or what I call "chaos hedges."
That's Step 1. With allocation, we've protected your portfolio from deep swings and ensured you'll have money until the end.
Tomorrow, we'll get into the nitty-gritty of fixing your retirement account... We'll take a look at why fees matter so much, and how index funds may be the best option in your 401(k)...
What We're Reading...
- My June 2015 issue of Retirement Millionaire is a must-read for anyone interested in fixing his 401(k). We're able to go much more in depth with these ideas, and we take apart our 401(k) at Stansberry Research to bust our fees down to 0.39%. (If you're not yet a subscriber, you can learn how to join here.)
- Triumph of the classic 60% equity/40% bond portfolio allocation over the last decade.
- Something different: One chart shows how much dating and romance have evolved over the last 60-some years...