Invest to build retirement savings

In the past few columns, we reviewed different retirement accounts and reasons to save for retirement. We also discussed changing your budget to include retirement savings.

Once your savings are in a retirement account, it’s time to figure out what to invest in. Here are a few tips to help you along the way.

Learn as much as you can. With investing comes a series of choices. Do you buy, sell or hold? Do you choose an index fund or an actively managed fund? Do you invest on your own or find a financial adviser? Do you invest for growth or income, or choose a balanced fund?

Before you settle on an investing choice, it is fundamentally important that you fully understand your options, and that you are clear on the reasoning behind the choice you are making.

Investing in securities comes with risks. People invest in the financial markets despite those risks because of the potential rewards, and because those rewards can provide a way to beat inflation and grow a much-needed retirement fund. To understand those risks, anticipate them, and do what you can to protect against risk, learning more about the markets is the place to start.

For a basic introductory guide, the U.S.  Securities and Exchange Commission hosts for new investors. Next, look for different books and articles on investing, take advantage of any workshops offered in the community, and talk to financial professionals about the services and advice they offer.

Learning more about the different securities and investing approaches will help a great deal. That information can protect your money against unnecessary risks, and help you ask financial advisers and professionals informed questions. It also can prepare you for the market’s ups and downs, and give you more peace of mind about your retirement fund.

Diversify your investments. We’ve talked about using a long time period for investing to protect against market risk. Another way to guard against risk is to diversify — in other words, to put your money into many different securities at once. If one of your investments falls in price, that loss can be offset by the rising prices of other investments in your retirement fund. Mutual funds provide diversification because they are composed of a mix of stocks, a mix of bonds, or both.

Understand your tolerance for risk.

Different securities come with different levels of risk. Stocks, or shares of ownership of a company, are the most volatile. Stocks can rise high, but they also can fall far. Bonds tend to be safer: they represent debt that a company must pay back with interest, rather than ownership. U.S. Treasury bills and notes are even safer, but with that safety comes the likelihood of a smaller return.

In general, the longer a time horizon you have, the more risk your retirement portfolio can absorb, and vice versa. As you get closer to retirement, it’s more important to hold safer securities, because there won’t be much time for the portfolio to recover from any potential loss.

Watch for fees. Fees will lower your return, so it’s important to understand the fees involved in investing, and to compare fees for similar products and services.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover,  please email him at


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