Five Surprising Signs that You Are Under-Investing
It is hard to figure out how much money you should invest. It often involves lots of research and a healthy dose assumption. No one can predict the future of the market with 100% accuracy. They can only make estimates based upon historical data, performance expectation, and other factors. Many people miss the mark because it’s difficult to determine what is an appropriate amount of money to invest. Here are five signs that you may be underinvesting. If your only investment is in a retirement account, this could be a sign that you are underinvesting. It’s not enough to have just one retirement account to achieve your goals. You can choose from voluntary options offered by your employer, brokerage accounts that are not retirement-related, or precious metals-based IRAs. Your Retirement Account Is Maxed, and Your Savings Account is Overflowing
Once you max out your retirement account and have a healthy emergency fund, continuing to put your money into a savings account means you’re missing out on an opportunity. Even if you have a high-yielding savings account, most savings accounts only offer minimal returns. As a result, the money you’re setting aside may not be keeping pace with inflation.
Now, it is smart to have money available in a highly accessible savings account for emergencies. Once you have a good amount of money, you can switch to a strategy that offers higher returns. You can withdraw the money from the account without penalties, and you will have more growth potential. This could be suitable for many different mid- and long-term saving goals. Your Portfolio is Low-Risk
While it’s wise to shift your portfolio into more conservative territory as you get closer to retirement, being low-risk long-term might not be ideal. You may be missing out on the growth potential of your investments if you are a risk-averse investor. If you want to stay low-risk, you should invest more. You can compensate lower returns by increasing your savings rate. You have lofty goals
For the majority of people, their investments are modest. They may, for example, want to retire in a comfortable but not luxurious way. If that’s the case, while they might need to save quite a bit, they don’t have to be overly aggressive.
However, if your goals are far loftier than average and you’ve been following standard investment advice, there’s a decent chance you’re underinvesting. The majority of recommendations for the percentages of salary to be set aside are based upon achieving average goals, rather than grand ones. If your dreams are more in the latter category, then you may need to put more money aside to achieve them. If you haven’t increased your investing after a major life event, this is a sign that you are not a good investor.
Many people take a “set-it-and forget-it” approach to investing. This is fine when your circumstances are stable but not ideal if they change. If you have a life-changing event, consider how it has changed your life. Ask yourself if more money saved would be helpful. Share your thoughts in the comments below. Share your thoughts in the comments below.
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