Avoiding Costly Investment Mistakes
When it comes to managing your retirement accounts, it’s essential to make informed decisions to secure your financial future. Recently, a listener named Jane shared her concerns about the current market conditions on the Women & Money podcast, seeking advice from financial expert Suze Orman.
A Risky Strategy
Jane considered selling all her current IRA investments and placing the proceeds into a money-market fund within the IRA. Her plan was to dollar-cost average back into the market over time, assuming prices might decline shortly. However, Orman strongly advised against this strategy, labeling it “the worst idea I’ve ever heard in my life.”
The Flaw in Jane’s Plan
Orman highlighted that Jane’s assumption about the market dropping was a significant flaw in her plan. No one can predict market movements with certainty, and trying to time the market can lead to considerable risk. By selling all her holdings, Jane would be trying to anticipate market fluctuations, which can result in missed opportunities and potential losses.
A Disciplined Approach
Orman recommended a more traditional approach, suggesting Jane maintain her current investments and add new money to her IRA. She emphasized the importance of dollar-cost averaging, which involves investing fixed amounts regularly, regardless of market conditions. This approach can help reduce the impact of volatility and avoids trying to predict market highs or lows.
Long-Term Growth
Orman believes in a disciplined, consistent investment strategy that capitalizes on long-term growth and minimizes emotional responses to market fluctuations. Timing the markets can be risky, and financial experts often caution against this strategy. Instead, Orman suggests focusing on a steady, long-term approach to investing, avoiding drastic changes based on market predictions.
Seek Professional Guidance
If you’re considering changing your investment strategy, it’s essential to speak with a trusted financial advisor. They can help you navigate complex strategies and outline a plan tailored to your unique financial goals, ensuring you make informed decisions to secure your financial future.
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