5 surprisingly simple investing rules that real people say will help preserve your wealth for your entire life

old couple retirementStart saving early and often.Jacob Lund/Shutterstock

  • Many baby boomers are starting to transition into retirement mindsets.
  • Investment management firm Capital Group identified five rules retired Boomer investors found to be “essential” to a secure retirement.
  • Investing isn’t just reserved for hotshot Wall Street types — it’s something that all Americans can do.

The baby boomer generation is starting to approach retirement.

And with that, they are getting into the retirement mindset.

In a recent report, investment management firm Capital Group shared its “Wisdom of Experience” survey, which looked at the changing dynamics for boomer investors, aged 53 to 71, as they transition into retirement.

The survey identified five rules retired boomer investors found to be “essential” to saving for a secure retirement, which could be useful for younger investors who are just starting out.

Some of these rules might seem obvious, but, to some degree, that is the point. Investing for retirement isn’t something that’s reserved for hotshot Wall Street types, but is something that all Americans can do.

They survey was conducted by APCO Insight, a global opinion research firm, in March 2017, and consisted of an online quantitative survey of 1,200 American adults — 400 of which were baby boomers — of varying income levels, who have investment assets and also who have some responsibility for making investment decisions for their families.

Below, the five rules boomer investors found to be essential, according to Capital Group’s survey:

1. Stay invested for the long term.

The vast majority of retired baby boomers surveyed — 92% — think Americans need to save more for retirement by getting and staying invested in the market. Four out of five believe Americans should go for a consistent investment strategy with long-term objectives, and only 32% said they would change their strategies based on the fluctuating markets.

On a related note, billionaire investor Warren Buffett also champions the stay-in-it-for-the-long-term strategy. At the height of the financial crisis, in October 2008, he wrote in a New York Times op-ed article:

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

2. Keep an eye on fees.

94% of retired boomers said they want to be able to “easily” understand what fees they’re paying. And 78% said low-cost, simple investments are better for the long-term.

3. Diversify your portfolio.

85% of those surveyed said that a diversified portfolio is one of the most important things for “a safe path to a better retirement.”

In other words, regular Americans just trying to save up for retirement probably shouldn’t risk putting all of their money in things like bitcoin.

4. Protect yourself against market downturns.

80% said it’s important to protect “your nest egg” and lower your risk of losses when markets swing downwards. And 30% said they wished they knew earlier about what to do when markets start getting shaky.

5. Start saving early and often.

79% said they think putting a portion of one’s monthly income toward retirement is one of the best things you can do. Moreover, 60% of respondents said they wished they had started investing as young as possible.

Although some younger investors might think diving into investing right away is intimidating or boring, those who start investing earlier could end up with significantly greater returns.

As Business Insider’s Andy Kiersz reported last year, the team at J.P. Morgan Asset Management showed a powerful illustration showing outcomes for hypothetical investors who invested $10,000 a year at a 6.5% annual rate of return over different periods of their lives.

The differences are remarkable: Chloe, who invested over her entire career from age 25 to 65, ends up retiring with nearly $1.9 million. Lyla, who started just 10 years later, has only about half of that, at $919,892.

And, somewhat astonishingly, Quincy, who invested only from ages 25 to 35, ends up with $950,588, slightly more money than Lyla, who invested for 30 years. That shows how important early compounding is to investing.

exponential curve chart prettyJP Morgan Asset Management

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