Money moves that you think sound great at the time can actually end up being big mistakes. Bottom line is, there are many potential investment opportunities for you to select from, but many don’t give you a rate of return that’s in line with your goals of retirement. In fact, many can’t even keep up with the inflation rate, so you won’t even make money on the deal.
Let the voice of reason guide you in your investments, and heed these warnings about the top worst things you can do with your money.
Investing too conservatively: This is one of the worst offenses. You may want to just dip your toes in the investing waters, but you may be taking it too safe with CDs, bonds and the like. Take an average CD, for example, which will give you a return of maybe one percent a year. With bonds, you could probably eke out about two percent. Of course, checking accounts are the worst, giving you not much better than a half percentage point. Inflation is about two percent right now, so you can see you won’t be making any money with these options.
Purchasing annuities: People hear that they can get a regular cash disbursement for the rest of their lives, so they go with annuities. However, this is something insurance companies offer their customers as a consumer investment product that can provide either regular fixed-income payouts (a fixed annuity) or variable payouts based on the performance of the underlying investments, according to The Motley Fool. The investments in fixed-income securities can’t keep up with the inflation rate, meaning you lose money in the long run. On top of that, you’ll pay large commissions and annual maintenance fees.
Helping others out: While your parental protective instincts will kick into overdrive when your adult children ask you to bail them out of a dire financial situation, take a moment to think that over. If you are well off and have the means to do so without compromising your own retirement, good for you. However, if your own retirement account is modest at best, keep your interests at heart and decline helping family and friends. Your children are young enough that they can recover, earn degrees for more earning power, get better jobs, and eventually get back on their own feet. If you are already in retirement and use a good portion of it to help them out, what are you left with? You could live another 30 years. How will you live it?
Chasing high-yield stocks: While high-dividend stocks can form a solid part of your portfolio, going after a stock because of its past performance and high yield is foolish. Always do your research to determine the sustainability of the dividend payout and the business model.
Of course, the top mistake you can make is not protecting your investments by letting a stock broker handle everything while you turn a blind eye. Stock fraud happens all too commonly in this country, which is why you need a securities lawyer on your side.