7 Tips for Stress-Free Retirement Investing

by Craig Ford on 12 June 2012 4 comments
Photo: Jerry Bunkers

Most investors forget that investing is a journey, and the trip is just as important as the end result. Who wants spend the investing journey biting nails, losing sleep, feeding ulcers, and being paralyzed by fear?

For many investors today, that's what the investing journey is like. But it doesn't have to be. Instead, you need to be sure to follow a well-laid investing plan. (See also: 5 Killer Free Investment Tools)

1. Decide If You Should Be Investing in the Stock Market

I hate riding on roller coasters. I know there are a lot of people who actually like riding on roller coasters — and they'll gladly pay money to do it.

I won't.

Some of us just don't have the stomach for the stock market. There are too many dips and spikes, and the result is a lot of emotional anxiety.

If that's the case for you, avoid the stock market and find another type of investing (i.e. bonds) that involves less risk.

2. Invest According to a Game Plan, and Stick to It

Who really knows if this is a good month to be investing or not? I don't, and I don't listen to anyone who thinks they do.

Instead of looking for mystics and prophets, you should stick to one of the following common low-stress investing strategies:

Dollar Cost Averaging (DCA)

Dollar cost averaging means investing the same amount of money on the same day of every month. Many brokerages even let you set up electronic transfers, so you never have to be involved in the act of initiating your investing.

Value Averaging

Essentially, with value averaging, when the market goes down, you buy more shares, and when the market is strong, you buy less. This helps ensure you'll reach your investing goal.

Invest It When You've Got It

With the historic upward trend in the market, some people suggest that you should invest the money whenever you have it to invest. If you can do all your investing at the beginning of the year, you should, because the shares will probably be more expensive at the end of the year.

3. Diversify

If you've read a single article on investing, you've heard the word — diversify. Spread your risk out. Don't leave yourself exposed to serious losses with the immediate decline of any single company's stock.

4. Don't Listen to TV News About Huge Gains or Plummeting Stocks

The folks on the news get paid to do one thing — keep you watching TV. The best way to do that is to talk about big movements (gains or losses) in the market. While not everything is hype, there are certainly people who stick around to watch when their money is on the line. Instead, you should turn off the TV and go for a walk, read a book, or play with your kids. Those are much more productive uses of your time.

5. Don't Check Your Portfolio Balances More Than Once a Month

There are some people who sign into their brokerage accounts every day. That's crazy.

Investing is like a crock pot and not a microwave. When you put a roast in the crock pot, you walk away because it will be hours before something happens. There's no point watching what your investments are doing if you don't plan to access them for 20, 30, or 40 years. Set it and forget it.

6. Review Your Asset Allocation Twice a Year at Most

When some segments of the market are performing really well or very poorly, there might be some changes you should make with your asset allocations. Once or twice a year at most, you can move your investments around just to re-diversify to your intended asset allocation.

7. Remember That Even When the Market Drops, There Is Good News

When the market drops, stocks go on sale. Some folks in their 20s are complaining about how much the market is going down. What? That's good news for them. That just means they get to buy more shares while they are cheaper.

Change your perspective and remind yourself that when the market goes down, it's not all bad news.

Armed with these few stress-free investing tips, hopefully you'll be able to put your retirement money in the market, place your head on the pillow, and have a worry-free night of sleep.

What tips do you have for stress-free investing?

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Guest's picture
Adam

Simple, brief, and effective tips! I especially liked #4. Its also important to remember that by the time you have heard about some big financial news, the market has probably already adjusted to it. Thanks for the article!

Craig Ford's picture

Adam,
That's exactly right. I think most folks who do respond to news they hear will often do it when it is too late.

Guest's picture
Mary

Nice list here.

I enjoyed tip number 5. I am guilty of doing this with my savings expecting something magical to happen and obviously it never does. Maybe I should try and take a leaf out of your book and make it every month!

- Mary

Guest's picture
Drew

With #5, if you're new to investing I'd say go ahead and check your balance every day, get used to the volatility while the balance is small. Observe what you're getting into. Train yourself to become indifferent to the ups and downs while there's less at stake. Keep it up until you naturally bore of it. A few years down the line you'll be far less likely to freak out and pull out in a big dip or recession.