We all make mistakes. As children, we make a lot of them. They’re a great way to learn! However, another great way of learning and avoiding certain mistakes is to listen to those who have dealt with the same hiccups.
Here are a few ways you can avoid mistakes when it comes to retirement planning and managing your money for the future.
Not Diversifying Your Investment Portfolio
Diversification can help you to lessen your risks associated with investing. If you invest all of your money, or a large portion of it, into just one investment and it performs poorly, a large majority of your investment capital is affected.
Overlooking Hidden Fees
There are many hidden fees when it comes to retirement planning and investing. Management fees, annual fees, purchase and redemption fees — the list goes on. These fees make it frustrating and difficult to keep track of how much you’re earning versus how much you’re paying out of any capital you’ve gained from an investment. Take the time to understand where all your money is going.
Ignoring Your Risk-Tolerance Range
If you can only handle low-risk investments, then only invest in low-risk investments. Part of why we look forward to retirement is the perceived stress-free status we believe it will bring. Don’t stress yourself unnecessarily by pushing yourself into a high-risk investment if that’s not what you feel comfortable with.
Starting Too Late
The best time to start investing was ten years ago, the next best time is now. The biggest mistake an individual can make when it comes to planning for retirement is spending all their time thinking about what they i do instead of actually doing it. If you do nothing else, start with an RRSP, a TFSA or an RRIF.
Selling When the Market Takes a Dip
Many people panic if the market takes a dip, and they see their money shrinking. This panic can lead to selling stocks or dropping investments. These dips in the market are actually a great time to stay the course. In the long run, holding on can actually benefit you.
Taking Your Canadian Pension Plan Too Soon
You can start cashing in on the CPP when you’re 65, but if you can put off collecting this money for a few more years, your monthly amounts will only grow.
Not Having a Plan at All
Going into retirement blind may sound exciting, but you’re going to regret that course of action pretty quickly. You need to have a firm understanding of what you’ll need, what kind of lifestyle you wish to have in retirement, and what that will cost. Most importantly, you need to know what you can realistically expect. All this knowledge comes from having a clear plan in place. No one wants to run out of money in their retirement because they didn’t plan ahead.
Investing in Things You Don’t Understand
Often, we see people investing in alternative investment strategies they’ve heard great things about, but they don’t necessarily understand how these strategies work. When you invest on your own with little understanding of the market, you can end up with a lot of regrets. The nice thing about many alternative investments is that they often have experts who can help you. Mortgage investment corporations or MICs are a perfect example of this. An MIC will help you invest in mortgage pools and diversify your investment into numerous real estate projects. This can be a very confusing investment strategy, and it’s best to look for help rather than trying to navigate it alone.
If you think investing in a mortgage pool is the right route for you, get in touch with Jordan on our team today.