ENGAGE IN LONG-TERM, DISCIPLINED INVESTING: The most effective and easiest route to reach your retirement goal remains employee-sponsored plans such as 401(k)s in which money is deducted from your paycheck so you can invest with pre-tax dollars. By doing so, you benefit from dollar cost averaging—the process of investing equal dollar amounts at regular intervals—enabling you to purchase more shares of quality companies when stock prices drop, a likely event in today’s tumultuous market. Since these tax-deferred vehicles are designed for retirement, you’ll face stiff penalties and tax liabilities if you withdraw funds before age 59 1/2.
DON’T PANIC: Ariel has also reported that African American investors have been more prone to pull money out of the market due to volatility. Here’s the problem with that approach: You’ll inevitably convert paper losses into painful capital losses and not reap gains when equities rebound.
INVEST IN WHAT YOU KNOW: It’s the tried and true process of spotting opportunities by targeting familiar companies, industries, and products. They tend to be market leaders with powerful brands, top-shelf management – and best of all, you understand their products and business models.
BUY STOCKS THAT PRODUCE DIVIDENDS: In an increasingly turbulent environment, select companies that provide shareholders with cash distributions on a quarterly basis. High-quality blue chips with yields of 2% to 3% can offer you additional cash flow.
PROTECT YOUR PORTFOLIO BY GETTING DEFENSIVE. As the economy continues its excruciatingly slow mend, look for stocks that perform in any market. Pharmaceuticals, personal care, household products, food and consumer staples—products consumers purchase in economies weak or strong—will buoy your holdings.
Even though you employ these strategies and stay abreast of economic trends, remember the stock market will at times take investors on heart-pounding roller coaster rides. Hold tight and adjust to every dip and turn. By doing so, you will advance your personal wealth-building program.