With all the volatility going on in the financial markets right now, I pulled a show from the archives with specific investing advice. The show originally aired at the end of 2018 when the markets were also going through a turbulent time.
No matter whether you're not sure if you're managing your retirement account the right way or you're hesitant about getting started investing, keep listening. I'll give you recommendations and answer a couple of listener questions about how to invest without being too risky.
When the market drops, that's the worst time to sell because you'd be doing it at a loss.
The takeaway is that if you have a long-term investment objective, such as building wealth for a retirement that's likely to happen at least five years in the future, you should not be rattled by what's going on day-to-day with the stock market.
The fact is, you really shouldn't even be paying attention to it, and I'm not. There's no reason to get emotional, react, or even to consider selling your investments during market turbulence. I know that may feel counter-intuitive. But when the market drops, that's the worst time to sell because you'd be doing it at a loss. I'm continuing to make retirement account contributions, and I recommend that you do the same.
When the price of funds in your retirement account or brokerage account goes down, they're on sale. If you contribute the same amount each month or paycheck, you end up buying more shares because they cost less. When the price goes up, you have more shares with higher values, and boom, your account value rises!
But because the stock market comes with short-term risk, you shouldn't have all your money invested. You also need to maintain a cash reserve or emergency savings. Your emergency savings and investments are two completely different buckets of money that have different purposes.
As I covered in last week's show, the Fed's interest rate cut means that earnings on your bank savings will likely drop a bit. Don't let that fact keep you from building your cash reserve and keeping it in an FDIC-insured bank savings account.
It doesn't matter if your bank savings account pays a pittance because its purpose is to keep you safe in the short-term. But the money you intend to spend in retirement is for the long-term. Money that you don't need to spend in the next five years should stay invested for as long as possible, so you take advantage of higher average historical returns that are necessary to build a substantial nest egg.
The bottom line is that staying invested for the long-term has historically paid off. The market reflects the overall growth in the...
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