Avoid These Investment Stumbling Blocks

Do you have enough saved up to retire? Are you even on track to attempt to retire one day? Saving is part of the problem, but so is investing.

Retirement plans report that many people who join those plans sit in cash for long periods, losing ground to inflation and, importantly, missing out on a chance to grow their money through compounding.

The average workplace retirement plan balance at the end of 2013 came to $89,300 across all age groups, reports Fidelity Investments. That’s up 15.5% from the year before, but largely on gains in the stock market.

Translation: We didn’t save more and just let appreciation substitute for putting money away.

Why do people procrastinate so when it comes to saving for retirement? The reasons vary, but each has a solution, a way to get on track and stay there for the long haul. Here are some of the common excuses and ways to resolve each:

1. I’ll think about it later

Sure you will. Then later never comes. If you find joining your company plan or setting up a personal IRA stressful, put a day on your calendar to get it done and take the day off work. Spend the morning sketching action steps, take lunch, and spend the afternoon working down the checklist: Open account, fund account, choose investments, done.

2. I don’t have enough money

You likely won’t at first, but 401(k) plans realize that and will allow you to start off low and build up money inside your account in actual investments, not just cash. In fact, the inertia around this issue is so big that companies are attempting to create default funds that you have to choose not to own.

3. The market is too low

When would you prefer to buy stocks? When they’re expensive again?

4. The market is too high

Yes, and it will go higher. Market timing is a big temptation among beginning investors and often leads to inaction that can last for months or years. If you make your investments periodically, say, with each pay period, you will buy investments at times when the markets are high and also at times when they are low. Importantly, you will invest, rather than sit in cash.

5. My uncle says buy Mongolian bonds

Last month he was all about corn futures. Last year it was options trading. Your uncle is a hobbyist investor who loves his hobby, which is fine. Just don’t try to do what he does. It won’t work out for him and it really, really won’t work out for you.

6. I’m in debt

There is good debt (a reasonably priced mortgage, low-cost student loans), acceptable debt (secured home equity) and dumb debt (credit cards). If you are awash in dumb debt, yes, get out of that debt, pronto. But don’t let your everyday finances be the reason you don’t at least start to invest for your future.

7. I hate thinking about money

We understand. Which is why you of all people should automate. Set up a 401(k) contribution schedule and fund it reasonably and guess what? You can stop thinking so much about money, except maybe once a year to review your progress.