Sunday, December 10, 2006

Using the Stock Market to Plan for Retirement

The stock market can be a powerful investment tool, especially if you're planning on making long-term investments. Unfortunately, the instability of the market can make many people hesitant to trust in it for financial planning. Despite this, if you're looking for a way to make plans for your eventual retirement you might want to set aside some of your mistrust for the market's instability and consider using the stock market as a tool for planning your retirement.

Below you'll find suggestions on how to best work the market to your advantage for long-term investment planning, as well as some basic information on common retirement plans that utilize stock investment.

Choosing Investments Carefully

One of the ways that you can maximize your investment so as to get the most out of your retirement is to take the time to carefully choose the stocks, bonds, and other market investments that you plan on putting your money into. This means that you should research the history of the various investments you consider making to determine whether or not the investment has a good potential as a long-term investment.

Examine the performance of the stocks and other investments that you're considering, making sure that you're choosing them because of their potential for future performance and not just because of how they have been performing in recent weeks.

Consider investing in companies that have been slow but steady performers over the course of several years, or those investments that deal directly with precious metals or other items that are not likely to suffer a drastic decrease in their value.


When choosing your investments, it's important to diversify your purchases by choosing stocks and other investments from a wide variety of market sectors and industries. Diversification is very important in long-term investing, particularly when the investment is designated to help pay for your retirement and sustain you through your retirement years.

By diversifying your investment portfolio, you can potentially avoid a serious drop in the value of your overall portfolio because of the poor performance of certain sectors or industries; the stocks and other investments in non-affected industries will likely continue to perform at their usual level (and may potentially rise), thus reducing the negative impact of the poor performance.

Watching Your Investments

It's important to keep an eye on your investments so that you can determine opportune times to purchase additional shares of certain investments or to sell shares of investments that are likely to suffer a long-term decrease in value. By keeping a close watch on your money, you can better take advantage of trends in the market and avoid potentially costly losses (or at the very least minimize your loss) that are based on the performance or scandals of the company that you are invested in.

Watching your investments is also a good way to get a feel for exactly how much your investments are worth, and to help make sure that they are worth that much if not much more when the time comes to cash in the investments and retire in comfort.

Common Investment Plans

Many employers now offer different types of investment packages as a part of their employee benefits packages. Stock options, 401(k) plans, mutual funds, and other investments may be available to you through your workplace; check with your employer to see if any company-sponsored investment plans can help you to meet your investment for retirement goals.

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