Do’s and Don’ts for a DIY Retirement

Maybe you don’t have the time or the money for a financial planner. Maybe you just have a lot of faith in your ability to manage your own
The fact is, millions of people make it to retirement without any formal financial planning. But that doesn’t mean they’re doing it well. Doing it yourself when planning for retirement is great, provided that you remain engaged and informed.
Here are some do’s and don’ts for a DIY retirement:
Do Set Goals, But Don’t Be Too Reactionary
It’s reasonable, and wise, to target 6% or 7% annual growth in your portfolio and become concerned if you’re falling short. After all, the difference between a 5% and a 7% annualized return can be the difference between preserving and eroding your nest egg.
This does not mean, however, that when a certain investment comes up short it needs to immediately go on the chopping block. Herein lies the biggest challenge in managing a retirement portfolio. It’s not just, as the song says, knowing when to hold ‘em and when to fold ‘em, but really taking the time to understand how various holdings are performing against the market and against your other holdings. It isn’t easy.
Rule of thumb: Moves in and out of different investments should ideally be done gradually to avoid knee-jerk reactions and choppy returns.
Do Seek Strong Returns, But Don’t Get Greedy
There’s a fine line between building a strong portfolio and becoming so obsessed with beating the market that you are rapidly moving in an out of holdings, and spending far too much on transaction fees with no clear long-term plan.
The reality is that if you have a portfolio that is matching market returns over the long term, then you’re doing pretty well. And sure, if you’re really smart and have luck on your side, some years you’ll beat the market. But pursuing a strategy aimed at outperforming the market year after year can easily become a strategy of folly.
Rule of thumb: Start with the premise that you won’t consistently outperform the market. It’s a good way to keep your expectations realistic.
Do Diversify, But Don’t Forget to Rebalance
Say you’ve determined that you want 80% of your money in stocks, 10% in bonds and 10% in cash. You allocate accordingly. Guess what? In five years, chances are you’ll have a completely different amount in each category.
Even if you’re buying for the long term, that doesn’t mean you can just invest and forget. Your portfolio will need regular maintenance. That means if your stock investments have done well, reduce your position so it remains at 80%.
On the other hand, if you see your stock holdings down to 70% in five years, you should in theory boost your stock holdings. Although at this point you should also take a look at what stocks you’re holding and consider why they’re not performing.
Rule of thumb: Check in at least annually to ensure you’re optimally balanced.
Do Study the Market, But Don’t Ignore Everything Else
Remember, you’re investing in stocks in order to ensure a comfortable life in your later years. To that end, you should be looking at the big picture – including the value of your home, your health care expenses, costs associated with your children and current or former spouse, and your big dreams and goals.
Even if you’re not officially including your home as part of your portfolio, it most likely is a significant holding to be tracked. If your portfolio is growing while your home value is falling, for example, or if the earnings you’re racking up are already spoken for by college or medical bills, you’re really not getting ahead.
Rule of thumb: Tracking your expenses may not be as fun as watching your nest egg grow, but it’s also a critical part of retirement planning.
Do Spare Yourself the Costs of a Financial Manager, But Don’t Overlook All the Free Resources That Are Available
Here’s the truth that financial planners wish you didn’t know: A lot of the information and tools they use are available for free.
This is not to say that paying a financial planner is a waste. It can indeed be money well spent if you don’t have the time or the motivation or, frankly, the skill to track all your own resources. But if you opt to take the do-it-yourself route, commit to becoming an active manager and use all the online calculators and tools available to track historical results, analyst reports, SEC filings and company news.
Rule of thumb: Do-it-yourself should not mean set to autopilot. Do it yourself, but do it right.

Retire on Just These Three Stocks 

Ian Wyatt has found 3 stocks that pay dividends so big — you can retire on them. The Wall Street Journal calls them, “mega-dividends.” These stocks have a history of consistently RAISING their dividends… quarter after quarter. In fact, one of these cash-cranking companies hiked its dividend 10-fold! So, if these ever-increasing payouts sound good to you… Click here for all the details.

To top