Sunday, December 7, 2008

Retirement Fund How to Create


The first step toRetirement is to decide how long you want to be an investor for. Many articles I read think 5 years is a long term investor. I believe if you are going to create a proper retirement fund it would be optimal to have 15 - 25 years a head of you before you reach retirement age. This amount of time will really allow you to take advantage of the many benefits a retirement fund has to offer. To maximize the benefits, one must believe they are going to be an investor for the remainder of their life.

Now that you realize investing is for your lifetime, let me give you one great way to create this retirement fund. Dollar Cost Averaging (DCA) or saving a part of what you earn. This concept is based on the idea that you take part of each pay cheque you receive and put it towards a purchase in your new retirement fund.

Once you do start, a couple of neat little things will happen. New investors hope the share price will increase. I know this is exciting for a new investor to open an account statement and see the fund grow in value beyond their contributions. The second little thing that happens is when a new investor receives a transaction statement. The most consistent part of an investors retirement fund is the dollar amount contributed. What a new investor will realize from the transaction statement is while they were saving a part of what they earned and putting it in their retirement fund. The fund shares grew in value creating gains, but a closer analysis shows as the share price grew you purchased less and less shares with each transaction. A decline in share value will allow you to purchase more shares for the same dollar amount.


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