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By Adrian Mastracci
North Shore News
Business Section, "Loose Change"
Sunday, April 14, 2002
Building your retirement nest egg need not be difficult. It takes
five wisdoms to pave the way for your retirement
accumulation.
Investing is about setting your course to achieve a specific return
so those personal goals become realities. Therefore, the foundation
for success requires patience and clear policies.
Achieving your nest egg is an investment marathon, not a 100-yard
sprint. Pace yourself, the portfolio can be built one brick at a
time.
Adopting the following wisdoms will accumulate your nest egg:
1. Establish reasonable goals
First, consider what you want your retirement nest egg to do for
you. The portfolio is influenced by your closeness to retirement,
present age, appetite for risk and investment personality.
It's also affected by your capital and saving capacity now available
for investment, and the rate of return required to achieve your
goals, such as financial independence and retirement.
2. Establish your appropriate investment mix
Studies show that investment mix decisions have the biggest impact
on portfolios of any single factor. Neither stock selection, nor
market timing is even close. Therefore, stay invested within your
profile.
Investment mix is the combination of asset classes, such as cash,
bonds, and equities. It's also about choices such as large versus
small companies. Your mix of assets considers not only your goals,
but also your investment horizon.
3. Strive for consistent returns
Too many investors are preoccupied with accumulating a portfolio
of yesterday's winners. This is an excellent strategy on how to
get burned. My advice is to stop chasing the best performing stocks
and mutual funds.
A portfolio with emphasis on consistent returns will serve you
better than one with emphasis on performance. Especially if it's
yesterday's performance.
4. Know when to cut your losses
Making portfolio selections is not about always being right. Part
of investing is about coming to grips with the prospects of being
wrong. Astute portfolio managers do admit to being wrong.
What hurts portfolios the most is not incurring the losses; rather
it's keeping them far too long. Be objective, know when to fold
and cut your losers. Every loss starts out as a very small loss.
5. Patience is a treasure
Keep your finger off the panic button as you accumulate your nest
egg. Never put tax strategies ahead of investment strategies. Factor
in market drops in your investment expectations, like the aftermath
of September 11, 2001. Patience with your investments is a treasure.
My experience is that investors who concentrate on these five wisdoms
make better portfolio selections for their nest eggs. They are also
rewarded with returns more in keeping with expectations.
Expect the investment marathon to serve up some rough patches along
the way. Keep a firm grip on your strategies and stay the course.
Patience rewards, your nest egg depends on it.
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