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Thursday, August 23, 2012

Planning your Retirement: The Three Killer Investment Myths to Avoid

Definitely, I don’t know anything about you or what takes most of your time, but I personally spend a bit of time a day planning my retirement. I seriously do.
I dedicate a good number of hours each day to settle on where on this earth I should build my dream beach bungalow. How minutes, hours or even days I will spend surfing against the waves versus the time I will spend idling or sitting in a pub, pretending I can.
How often I will come back to Kenya. That’s if I will come back to Kenya. Whether I would buy an old beat-up Vitz, or just walk the dusty streets of Kampala, Uganda. You definitely know what’s important here.
You may think am crazy….. especially, at this point in time when we are facing the worst bear market of our lifetime.  
In fact your next suggestion or ‘advice’ for that matter would be that I should wake up, stop day dreaming about retirement. I am only in late 20s, that’s time to dust my resume and continue working.
From the analysis of the stock market Warren Buffet noticed that despite the major problems the U.S economy faced in the 20th century: the two world wars, dozens of recessions, a flu epidemic, and oil shocks; the Dow went up from 66 to 11,497. In fact this observation still holds today and is what Warren used to make his investment decision. He believed that stocks will usually grow your money in the long run. His investment motto was “buy a good stock and hold on to it as long as possible”.  
I know most investors would want to think like Warren Buffet or act like him at times – which is not bad at all. Unfortunately, however, some of us do not have the 10, 15 or so years before retirement. In this case it will be tricky holding on to Buffets advice on investment – I would straight away suggest that you be quick to think of your retirement plans.
But for those of us who still have 10, 15, or 50 years before retirement, you should follow Buffet’s lead and search for these great businesses with powerful moats, selling at competitive prices.
Whatever you choose to do, do not fall prey of any of the following investment myths which have kept people away from their dreams:
Myth 1: It is too early to Start Saving for Your Retirement Plan
Too early to invest into your retirement plan? Hogwash! Imagine Tiger Woods waiting until he is 35 to swing his first golf club or Serena Williams waiting for her first forehand touch at a mature age, possibly 24. Would we be having these two stars now? These two players made it big on the international scene by making the first leap ahead of others and never looking back. Golf has always been known to be the old man’s game – at least in this part of the world. This same belief is held by many whenever they think about planning for retirement.
Back to investment, it is more of a coincidence that Warren Buffet started investing at the age of 11. Does it mean that he did his first investment at quite young age and continued practicing everyday so as to become the most successful investor? I don’t think so.
Then what is the trick? May be avoiding myth no. 2 may help.
Myth 2: The “I can’t Beat Serena Williams” Syndrome
If you have watched Tennis tournaments in the past decade or even in the just concluded 2012 London Olympic then you will certainly believe that no one can beat Serena Williams, not even Maria Sharapova. Likewise, beating Woods on a cool Sunday or otherwise is certainly impossible.
Moreover, it is against all odds that any of us will be a better investor than Warren Buffet. Nor is it likely that we will one day brag of how early we got in and rode to success.
So what? Just because I can’t beat Serena doesn’t mean years of practice, persistence and dedication won’t turn me into a good tennis player or that practicing how to hit the bucket on a daily basis won’t improve my drive.
Similarly, the fact that you can’t match Buffet’s investment success or wealth doesn’t mean you shouldn’t follow his investment style - finding and buying the stocks of those great companies which are selling at lower price.  Unfortunately, most investors think their life changing investment option will only come in through getting an early venture into the next Dell or Sun Microsystems.
Myth 3: It is hard to plan for Retirement
One final thing which holds prospecting investors from achieving their dream goals is the same thing which should help them achieve it – hard work.
There is no source to quote here, but I will be a liar if I’m to tell you that planning for retirement or making any investment is easy. But you will have to commit yourself to this course and make investing a priority today. You may just realize that it is much easier than it would have been.
It is never too late to plan for your retirement or start any form of investment. The earlier you start the better. So start now when there is still time and work hard to make this investment count.

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