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Investment mistakes seniors should avoid

Finance & Planning | Apr 23, 2015

Effectively investing finances is likely a harrowing concept for many Americans. Seniors, in particular, need to be adamant in creating a plan and sticking to it to ensure they are prepared for a comfortable retirement. Planning with Medicare supplemental insurance or deciding when it's best to sell their home are some aspects of finances seniors need to consider.

In an analysis report from DALBAR, a market researcher, the results showed equity funds averaged a 5.9 percent return over the course of 10 years. The gain for those who invested in the Standard & Poor's 500 index averaged higher at 7.4 percent.

The analysis indicated the most substantial losses typically happen after a decline in the market. Individuals tend to invest only when markets regain their values. However, this behavior also means the investor will not have stocks during the market rise and this is when the most substantial money is earned.

With that said, here is a list of mistakes investors should avoid:

  • Having no plan: Likely the largest issue facing Americans with their finances is a lack of planning. To set themselves up for a comfortable retirement, they have to adequately plan their finances, from their 401(k) to their monthly bills. Creating a sound investment strategy will likely pay off in the end, so it's important to put a plan in place now.
  • Being too conservative: While seniors likely want a safe strategy to retire, some risk is good, as it can lead to a larger return on investments. Having a portfolio that is too conservative can significantly reduce opportunity to gain more money for retirement, so it's important.
  • Overcomplicating things: While investing might seem like a daunting process, it can be as straightforward as someone wants it to be. Not stretching oneself too thin is essential, however, it's also important not to put all eggs in one basket. Someone can do this by diversifying, while at the same time, only investing in things they truly understand and feel comfortable putting money toward.
  • Having expectations that are too high: Investing should be conservative, hopefully getting someone more money at the end than he or she had at the start. However, having unrealistic expectations can weigh heavily on decision making and could be costly. Someone might have high hopes for an investment decision that might be ill-advised.