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[September 20, 2011]
You can learn more about how financial markets work by attending one of UC's financial education classes, at no cost to you. Fidelity Retirement Services provides the classes as part of UC's financial education program for faculty and staff.
Here are some basic points from UC classes on building a portfolio and developing a financial plan
1. Don't try to time the market. If you're hoping to sell all your investments at the high point of the market and buy back in at the low point, you're counting on a crystal ball that nobody has. It's just too risky a strategy. Choosing investments that have no investment risk (such as all cash) carries the risk that your savings won't keep up with inflation.
2. Consider dollar cost averaging. This means investing the same dollar amount at regular intervals. When prices are low, this fixed dollar amount buys you more of the security; when they're high, that fixed dollar amount buys less.
3. Practice diversification and asset allocation. One of the most important things you can do to help shield your investment portfolio from market volatility is to diversify, both within asset classes and across them. Asset allocation is spreading your money among different types of investments, or asset classes, such as U.S. and international stocks, bonds, and short-term investments. Once you've done that, you can diversify investments within each of these classes. While it cannot ensure a profit or guarantee against a loss, diversification allows an investor to seek some downside protection and participate in the upside potential of asset class movements.
4. Save and invest for the long term. To help calm the jitters caused by short-term fluctuations, it's best to focus on long-term trends and your long-term goals. Market volatility decreases over time. Holding a stock for 20 years reduces its volatility by two-thirds, compared with keeping it in your portfolio for just a year.
Having a secure retirement should be one of your biggest financial goals, but that means saving and investing over the long haul. While it's natural to be nervous about your retirement savings in times of volatility, one of UC's financial classes can help you develop a long-term financial strategy to stay on track. To learn more attend:
For details on all the classes UC offers, visit www.ucfocusonyourfuture.com and click on View Class Guide.