New to investing, or just need a quick review of the basics?
Educating yourself is a smart move. And it only takes a few minutes to gain helpful tips. No matter how new or experienced you are at investing, keeping your long-term retirement goal and plans in mind is important. Whatever your plans are, you’ll want to consider how much income you’ll need to make them happen.
5 investing tips that may be right for you
1. Investing early
Want to begin investing, but don’t have much to get started? That’s OK. Starting early, even with a small amount, may result in higher savings over time. Like all good habits, it’s easier to start off right than it is to try to make up for lost time later. As you develop sound savings habits, the easier it will be to save more as you earn more.
2. Diversifying your investments
Hoping to make the most of the dollars you’re investing? Selecting a variety of investments from different asset classes or “risk levels”—also known as diversification—may help reduce the ups and downs of investing. A simple truth: Investments and the market are typically impacted continuously by environmental, economical and political changes. Some changes have a positive impact and others have a negative impact. By diversifying your investments, you may be able to minimize the potential negative impacts — and take advantage of the potentially positive impacts. It’s important to know that asset allocation and diversification do not ensure a profit or protect against a loss.
3. Knowing your comfort level with risk and your years to retirement
Risk and years to retirement are probably not on your list of favorite topics. But when these two are aligned, they may help you make informed investment choices. If you’re nearing retirement, you may not want to take on much risk, and you may be more comfortable with investments that typically have lower risk levels and return potential. However, if you have several years until retirement, you may be willing to take on more risk—and may be comfortable with investments that offer generally higher growth potential. Keep in mind, with higher growth potential, there is also the potential for a greater loss.
Want help determining your investor profile? Take our short quiz.
4. Keeping your investment selections in line
Do you ever wonder if your investments are on track? Over time, markets change and some investment options may perform better and grow faster than others — causing your investment mix to differ from what you originally selected. Rebalancing can help reset your investment options based on your original goals.
You have a few options when it comes to rebalancing:
- Rebalancing as life events occur.
- Choosing to automatically rebalance your account— quarterly, semiannually or annually—based on which time frame fits your personal financial goals.
- Or maybe you’ve decided that the shift in value of investments is actually more in line with your future goals—that’s OK too. You don’t have to rebalance.
5. Avoiding emotional decisions
Do you panic at the thought of market ups and downs? You’re not alone. Individuals generally feel a bit nervous as they watch the market in action. You can’t control market volatility, but understanding that it’s a normal part of investing might help lessen its impact on your retirement by sticking with your long-term plan.
History tells us that over time the market generally bounces back from periods of volatility. Even the worst market declines have generally been followed by a significant recovery. A year after the 2008/2009 market drop, it rebounded by 53.6 percent.*
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* Source: Wilshire Compass — reflects S&P 500 Index returns. The S&P 500© is an unmanaged index and investors cannot invest directly in an index.
Investing involves risk, including possible loss of principal. Asset allocation and diversification do not ensure a profit or protect against a loss.
Equity investment options involve greater risk, including heightened volatility, than fixed-income investment options.
This document is intended to be educational in nature and is not intended to be taken as a recommendation.
Insurance products and plan administrative services provided through Principal Life Insurance Co. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC and/or independent broker-dealers. Principal Life, Principal Funds Distributor, Inc. and Principal Securities are members of the Principal Financial Group®, Des Moines, IA 50392. Certain investment options may not be available in all states or U.S. commonwealths. Separate Accounts are available through a group annuity contract with Principal Life Insurance Company. See the group annuity contract for the full name of the Separate Account. Principal Life Insurance Company reserves the right to defer payments or transfers from Principal Life Separate Accounts as permitted by the group annuity contracts providing access to the Separate
Accounts or as required by applicable law. Such deferment will be based on factors that may include situations such as unstable or disorderly financial markets; investment conditions which do not allow for orderly investment transactions; or investment, liquidity and other risks inherent in real estate (such as those associated with general and local economic conditions). If you elect to allocate funds to a Separate Account, you may not be able to immediately withdraw them.