We often find ourselves flooded with stories of individuals who seemingly struck gold through high-risk, high-reward investments or achieved astronomical returns on their portfolios in a short amount of time. As 401(k) advisors, it’s our responsibility to shed light on the fact that while these stories are alluring, they often lead to unrealistic expectations, disappointment, and, potentially, financial loss down the road. Becoming wealthy is not always sexy. It mostly involves a lot of patience, a high savings rate, and the fortitude to stay the course when markets get choppy. In this blog post, a 401(k) advisor will dive deep into why we believe your rate of savings is just as important as your rate of return.

What is Rate of Savings?

Your savings rate is a percentage or ratio that you deduct from your disposable personal income to save or invest for retirement. Rather than spending this money on goods or services now, you’re saving for the future. In our experience, the more someone can continually set aside for retirement, the better probability they will reach their retirement goals.

How Important is Investment Performance?

While investment performance is important, the odds of actually beating the market are low. Studies have consistently found that actively-managed funds typically don’t perform better than index funds over the long term, and even the short term. Since it’s unlikely that your portfolio will beat the market, instead focus on what you can control, such as how much you can save.

We’re living in a world where the allure of instant wealth is pervasive. You’ve probably heard tales of individuals who turned a small investment into a fortune overnight. These stories can be captivating, sparking dreams of replicating such success. However, they often paint a misleading and dangerous picture.

Instead of trying to get rich quickly through high-risk, high-reward investments, we recommend that you speak with your wealth manager about implementing a more well-rounded and diversified investment plan that includes recurring savings. In addition to providing investment guidance, a well-thought-out financial plan will consider the entirety of your financial well-being, investment portfolio, and retirement goals.

One popular strategy that highlights the importance of patience and consistency is dollar-cost averaging. Dollar-cost averaging is an investment approach that involves regularly investing a fixed amount of money, regardless of market conditions. This strategy hedges against natural market fluctuations, ensuring that you buy shares at their high and low points. Instead of trying to time the market, you’re consistently working toward your long-term financial goals. It’s a simple yet effective way to stay in the marathon and avoid the pitfalls of emotional, impulsive decisions.

Alternatively, investing a lump sum of money has considerable risk. If the market recedes, that can instantly erode significant wealth. If you come into a lump sum of money to invest, we highly recommend reaching out to a Morgan Rosel Wealth Management investment advisor with strategies to manage risk. 

Setting Realistic Expectations

Establishing achievable and realistic financial goals serves as the bedrock of securing your financial future. Doing this with the guidance of your 401(k) advisor can be transformative. Their expertise proves invaluable when aligning your goals with your unique financial situation, risk tolerance, and investment options. Thanks to their insights, you can develop a realistic roadmap adaptable to life’s uncertainties.

Setting realistic expectations involves truly embracing the expression, “slow and steady wins the race”. Making incremental contributions, whether it’s towards your investment portfolio or your retirement accounts, can make a big difference down the line. For example, if you’re not contributing to your 401(k) and you have a goal of contributing 10%, start with 3% and adjust your contribution up 1% per month until you reach your targeted goal of 10%. This small incremental increase will be easier than jumping from 0 to 10% overnight. The key is to be consistent.

One of the most important things to remember for setting these expectations–especially with goals like saving for retirement–is that it’s a long-term strategy. It’s not a quick fix or a get-rich-quick scheme. Your 401(k) advisor will emphasize this point, encouraging you to keep your eyes on the prize and avoid making rash decisions based on short-term market ups and downs. By embracing the long game, you can harness the magic of compounding returns and better weather the storms of market volatility. Consistency in contributions and sticking to a well-structured retirement plan are keys to bolstering your financial security for years to come.

Patience & Resilience– Building Wealth is a Marathon, Not A Sprint

Building wealth is a lengthy process, and many things can change over time, especially when you consider market conditions. The question isn’t “if” the market will fluctuate. The question is “when.” It’s a fundamental aspect of the financial world that every investor should come to terms with.

Think of it this way: When you decide to save and invest for your long-term goals, like retirement, you’re essentially starting a marathon. Just as a runner doesn’t get discouraged by the occasional hill or fatigue along the way, investors should not be surprised by market fluctuations. These fluctuations are like the hills in your investment marathon–they’re to be expected. In fact, they are part of what makes investing a rewarding journey.

Working with an Experienced 401(k) Advisor

Along the way of reaching your financial goals, life has a funny way of presenting detours and distractions. Unexpected expenses, career changes, family events – these are just a few of the roadblocks that can pop up and threaten to veer you off your financial path. It’s during these moments that having a solid understanding of investing, finances, and the market landscape becomes crucial.

Rollover a 401(k)

If you have a 401(k) from a previous employer it may be a good idea to do a 401(k) rollover into an IRA. In this post, we go into the pros and cons of a 401(k) rollover and explain four options.

Having a 401(k) advisor is like having a trusted co-pilot on a road trip. These professionals are well-versed in current market trends, economic indicators, and investment opportunities, which can be challenging to keep up with on your own amidst the hustle and bustle of life. By entrusting them with your portfolio, you can stay focused on living your life while knowing that you have a dedicated investment advisor managing your wealth.

Our Team of Investment Advisors Can Help

Sustainable financial success is not about chasing high-risk, high-reward investments or quick fortunes. It’s about setting achievable goals, adopting a long-term mindset, and following a strategy in which you’re consistently saving. Our team of high-net-worth financial advisors possess a deep understanding of the financial landscape. We have years of experience in helping clients achieve their financial goals by emphasizing savings, patience, and resilience.

Empower yourself to take control of your financial future by contacting our team today. Let us help you navigate the complex world of investments and guide you toward a prosperous financial future.

This commentary reflects the personal opinions, viewpoints and analyses of the MorganRosel Wealth Management, LLC (“MRWM”) employees and guests providing such comments, and should not be regarded as a description of advisory services provided by MRWM or performance returns of any MRWM Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. MRWM manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. MRWM may recommend the services of a third-party attorney, accountant, tax professional, insurance agent, or other specialist to clients. MRWM is not compensated for these referrals.