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Keeping Out of the
"Ditch" with Your Retirement Funds |
 The
year 1998 proved to be one of the most volatile financial years
in decades and taught us many lessons. Interest rates slid to the
lowest levels in recent memory.
As you enjoy or approach retirement years, remember—your
financial life is a journey which still has a long way to go. Retirement
is not an end—it is a beginning that will last for 20 years
or more.
To protect your retirement and savings, you must
avoid the "ditches" of fear and greed that line each side
of your "retirement road."
Fearful investors
might place all their money in treasuries, insured CDs, or (worse
yet) under their mattresses or in gold. They invest this way in
order to avoid a temporary loss. Unfortunately, permanent loss occurs
instead because of lack of growth, erosion of purchasing power,
and outliving their retirement resources.
Greedy investors
are even worse off. They invest in a mutual fund that has been the
hottest for the last five years—just before that fund's strategy
falls out of favor and drops. They pick the hottest stock—just
as it reaches its all-time high and then watch it fall to its normal
levels of growth.
Good stewards will
avoid these "ditches" by choosing the middle and staying
there for the long road to financial success.
Enjoy the "middle road" by following three simple
rules:
- DIVERSIFY by
investing in equities and fixed income. Diversifying works because
the value and return of different investments often rise and fall
independently of each other. As you get older, gradually reduce
your exposure to equities but still diversify.
- DIVERSIFY by
using different investment managers. Invest with those who consistently
perform in the top 25 percent. Do not pick last year's biggest
performer as they are probably due for a big correction.
- DIVERSIFY by
using different investment styles. Some investment managers invest
only in large companies. Others look for value while still others
look for growth. Styles of investing fall in and out of favor
in the marketplace. By investing with managers who have different
styles, you reduce the volatility of your investments.
Diversification will make your retirement years
more enjoyable and your "financial road" less bumpy while
avoiding the "ditches" of fear and greed.
If you would like some assistance in financial
matters, the Assemblies of God Foundation is available to serve
you. Call us at 417-865-4880.
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