It’s never too late to make smart choices

In recent weeks I’ve described the plan of an impressive 20-year-old investor seeking to amass a comfortable retirement nest egg. Some readers were no doubt mumbling to themselves: great for him, but I don’t have 42 years of investing ahead of me.  How about me, right now?

Yes, time is a great advantage, but no matter your age, you have some real choices you can make right now to improve your investment situation.

Opt out of the news cycle – The news and the markets are not the same.  Amid all the dire news in October – threats of recession, congressional dysfunction, and stubborn unemployment – the S&P 500 soared more than 13 percent, the best monthly gain since 1974. The news can be entertaining, but can also drive emotional short-term investment choices that may work against long-term goals.

Drain excess liquidity – If you’re managing your portfolio to have immediate access to all of your cash all the time, you’re probably not holding the portfolio you need to meet long-term goals.  Determine your cash needs for the next two years and let the rest of your assets work for you to reap their just returns.

Spend less – Every dollar spent today is a dollar less that can compound for years toward your health and comfort in retirement. Challenge yourself to spend your money on what matters today and invest the rest for your future.

Be your own bond – Many investors overlook their employment earnings when designing their asset allocation and assessing portfolio risk.  You are your own best human capital, so if you expect to make $100k-$1m per year for the next 10 years, think of that income as a high value bond when you look at your overall asset allocation (risk-adjusted based on your job security).  Other, smaller bond-like portfolio pieces are retirement savings accounts and Social Security.  Keep all these in mind when you build your portfolio. The point is to consider all assets when investing, especially your own earning power.

Cut costs – This is an easy one that we have written about repeatedly. Costs go down with investment size.  Consolidate. Simplify.  Do a cost audit.  Look for savings.  Take advantage of the low cost structure of index ETFs. Be wary of “exclusive” high cost solutions.

Think multi-generationally – Add 25-75 years to your investment time horizon by managing your investments for future generations. Let investments for your beneficiaries – family, charity, or other – compound for a few extra decades.  History shows that returns are more likely to be positive over longer time periods. Give your estate the gift of time to achieve your legacy goals.

Keep score – Demand clear reports from your investment advisor that show how you are doing – after expenses and after taxes – compared to your goals. Good reports reveal opportunities.

Enjoy your money – They say you can’t take it with you, and with no reports to the contrary, they must be right!

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