The investment factor you can control
You can’t control the direction of the markets or the return on your investments, but you have complete control over the amount you save and invest. And the amount you regularly invest may be the difference in meeting your financial objectives or not. Here’s a look at some life situations that typically call for investing more.
Stay on track
When investors with a lower risk tolerance have a conservative portfolio with lower potential returns, they must regularly contribute larger amounts compared to more aggressive investors with similar financial objectives and time horizons. Also, investors of any natural risk tolerance typically make their portfolios more conservative in the years approaching retirement. As this adjustment reduces growth expectations, investors may need to increase contribution amounts to keep their portfolios aligned with their investment objectives.
Capitalize on opportunities
When cash flow increases, you gain the opportunity to boost the amount you regularly invest. Such an increase may result from a salary raise, children becoming financially independent, a spouse re-entering the workplace, or finally paying off the mortgage. Ramping up contributions could lead to an earlier retirement or enjoying an enhanced retirement lifestyle.
Teach your children
Young adult children haven’t experienced the results of compound growth and may be less motivated to save and invest. Or they may be financially unable to start just now. Imagine giving a child a cash gift that she or he deposits into a registered plan. Let your child know that at a 5% annual return, the single deposit will more than double after 15 years. In other words, most of the money is investment growth – not the original contribution. Your child may appreciate the value of saving.
If you ever wish to discuss your regular contribution amounts or investment objectives, please feel free to get in touch with us.
Tags: Winter 2019