Does the recent fall in the market worry you? Depending on your age, it shouldn’t. If you’re a millennial, there’s something else that should worry you more. The good news, though, is that it’s something you have total control over.
If you’re like most investors, you read the results of the market every day. In fact, the larger your investment account, the more attention you pay to the market.
In all likelihood, the biggest investment account you own is your retirement account. If you’re invested for the long-term, your retirement account will go up and down with the market. Because of this, it’s common for someone in your position to want to learn more about investments and how to measure them.
Don’t bother. You can’t control the market. Focus instead on something you have the power to make a difference in.
“Investing metrics don’t matter unless there is money to invest,” says Jennifer Ellison of BOS, a wealth management firm in San Francisco. “Without saving, investment metrics make no difference. But once you begin saving, it is very important to let investments do the work over time.”
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Time is the key factor here. The more time you have to save until retirement, the less concerned you should be with investments. While day-to-day fluctuations can exhibit wide swings, the markets tend to produce a reliably consistent range of returns over long periods. Smart retirement savers know how to take advantage of this reality.
“Time in the market matters more than timing the market or trying to pick the next Apple AAPL or Amazon AMZN ,” says John Madison, Financial Counselor at Dayspring Financial Ministry in Ashland, Virginia. “Historical returns show us that investing early and at regular intervals provides better long-term results, regardless of the specific allocation chosen. Savers can’t control much in the investing process, but they can control when and how often they invest.”
The key to success when it comes to achieving a comfortable retirement rests within the three factors you have authority over.
R. Brad Knowles, Managing Director of Heritage Retirement Plan Advisors in Oklahoma City, says, “For most people, there are only a few elements you can control in retirement: how much you save, how long you save, and when you retire. You cannot invest your way to a successful retirement. You can only save your way there.”
Think about the nature of “saving” versus that of “investing.” In particular, what do these two terms mean to you? With a little thought, you can quickly see that “saving” involves your behavior while “investing” relies on the behavior of others.
“In most cases, people have more control over their own habits and choices than they do over this inanimate object we call ‘the investment markets,’” says Rob Isbitts, Co-Founder of TheHedgedInvestor.com in Weston, Florida.
The trick, then, is to discipline yourself so your behavior places you in the advantageous position of making the most out of time. And there is no better time to grasp the power of “time” than right now, no matter what your age.
“In general, the earlier you start, the longer you have for money to compound,” says Ken Van Leeuwen, Managing Director & Founder of Van Leeuwen & Company located in Princeton, New Jersey. “The length of time for the investment dictates how much you need in return in order to achieve the goal.”
There are millions of excuses for holding back on contributing to your retirement plan. In the end, such procrastination could end up costing you millions.
“There’s no way to ‘make up’ for multiple decades of low or delayed savings,” says Ryan McPherson, Director of Coaching and Advising at SmartPath in Atlanta.
If you want to know the secret, it’s as simple as this:
“Time is a savers best friend, and most savers have a clear-cut plan,” says Craig Borkovec, Financial Advisor at Miracle Mile Advisors in Los Angeles. “The longer you have to save, with a correct plan, the greater your chances are of taking advantage of return potential the stock market can offer you.”
When you start contributing, how much you contribute, and how long you contribute for; these are the three levers you have the power to pull. All else is outside your grasp. Understanding and accepting this will also help you sleep better at night.
“There’s a lot in life and financial planning that you cannot control, that makes it so important to control what you can in order to achieve your goals,” says Kyle Westhaver, Financial Advisor at Nicola Wealth in Toronto, Ontario, Canada.
It’s important, therefore, you don’t succumb to the temptation to become an expert in investments (unless it’s your day job). Become an expert in the aspects you can take action on.
“These are metrics that a retirement saver has direct control over,” says Michael Clark, Managing Director & Consulting Actuary in Denver. “The likelihood of someone having enough money for retirement increases dramatically when an investor starts earlier, saves longer, and contributes more.”
You dream of living a comfortable retirement, yet find yourself fretting over the unknowns of the distant future. Allow that distance to work for you, not against you. You command the strings. Pull them in the direction that moves you closer to your goal.
“Time is the number one factor for the best retirement plan, and one that most investors ignore or do not understand,” says Curtis Ray, CEO of SunCor Financial in Gilbert, Arizona. “How much money you can set aside in a secure place and then allow time to enhance the compound interest inside, is a guaranteed path to wealth for anyone who gives their money enough time to work.”
Do you recall the lesson from the fable involving the tortoise and the hare? In modern times, the hare would be more concerned with investing. The tortoise would be more concerned with saving.
Remind yourself again which critter won.