Start Your Long Term Savings Before It’s Too Late

long term savingsDuring an economic downswing, many people shy away from investing. After all, when spending decreases, and unemployment rates increase, investing in your future may seem like a giant leap of faith.

Historically, the stock market has always recovered from every economic downturn, and generally can be relied upon as a safe place for long-term investment. Consider investing as part of your plan to save money for your future.


Long-term vs. Short-term Investments

Short-term investments often don’t pay off during an economic downswing. They can have high returns in a few weeks or a few months, but entail additional risks not usually found in long-term investments due to sudden fluctuations. When the economy seems volatile, you don’t want to expose your capital to the risks found in short-term investments.

Instead, invest money to save for retirement, focusing on investments with more robust gains garnered over the long-term rather than trying to gain from short-term volatility.

You can invest smaller amounts of money over a long period of time when you focus on long-term investments. Slowly but surely, your investments grow, and by the time you reach retirement you can have a tidy sum set aside to supplement your other retirement income.


Important Investment Strategies to Consider

If you have never invested before, the process may seem intimidating. Working with a professional financial advisor can assist you in planning for retirement. Financial advisors help assess risks and the amount of money you have available to invest, and recommend the wisest investments for you and your family.

Some strategies to help you begin investing include:

1. Begin Saving for Retirement With an IRA
Traditional IRAs and Roth IRAs each have a different set of benefits and drawbacks. Investigate both options before choosing the best one for you.

2. Strongly Consider Investing in a Mutual Fund
American-based Vanguard offers mutual funds for investors. The company has an excellent reputation and offers many investment options. A Vanguard funds manager can work with you to determine your financial goals and to help you with your investment choices. Thoroughly research any mutual fund before investing.

3. Open a College Savings Plan
If you have children or plan to have children, open a college savings plan. The two most popular options are the 529 college savings plan and the Education Savings Account (ESA). The plans provide tax benefits for participants saving for their children’s college education.

4. Diversify
You may have heard this tip before, and it still rings true. Make sure you have a well-balanced, diversified portfolio. Spread assets around, rather than placing all of your savings in one type of investment. Invest across a mix of stocks, bonds, cash, and international funds. Within your investments, diversify between different sectors and industries. Diversifying your portfolio helps you to manage your investment risk and protect your savings in the event of an economic downswing.

Don’t set up your portfolio and then forget about it until retirement time. You need to review your portfolio periodically, at least quarterly, to make sure no revisions need to be made to your plan. Meet with your financial  adviser  annually on a more frequent basis, depending upon your needs. Your investment portfolio needs regular care and maintenance in order to flourish.


Final Thoughts

These tips can help you begin saving for your future, but you need to conduct additional research before investing your savings. Further educate yourself by meeting with a financial advisor, taking classes, or joining an investment club – or simply do research online or at your local library. Your willingness to learn helps ensure that your investment portfolio will pay off during your golden years.

What’s your strategy for investing for the long run?

(This has been a guest post by David Bakke who is a contributor for the  Money Crashers  personal finance blog. He covers financial topics including budgeting, finding the best shopping deals, investing, and planning for retirement.)