There’s no room for error or guesswork when it comes to long-term financial security. Fortunately, most working people pay close attention to their IRAs, investment portfolios, savings accounts, and other assets. The negative side is that there are many myths floating around in cyberspace and elsewhere related to the topic of wealth building and maintenance. Consider the following bits of misinformation so you can be more aware of them the next time they pop up in an online discussion forum or favorite blog.
IRA Contributions Must Be Consistently Large
Longevity and consistency are more important than amounts. Don’t fall for the faulty notion that retirement accounts require substantial deposits. On the contrary, the concept behind saving for non-working years is based on the theory of large numbers of small contributions. Those who start early, in their 20s can amass a significantly large amount of funds through modest, sometimes rather small, regular additions to IRAs.
Cosigning on a Student Loan Hurts a Person’s Credit Rating
There’s no guarantee that cosigners will be harmed or helped by putting their name on someone’s college loan application. Working adults with good credit ratings can serve as cosigners on education loans and thus vastly improve the primary applicant’s chances for approval. It’s essential for potential cosigners to realize that there are pros and cons of doing a good deed for a student who needs financing for school. The wisest way to get started is to review an informative guide on the subject, one that delineates all the pertinent factors related to becoming a cosigner on a college loan application.
Wealthy People Risk Everything When They Invest
Most financially comfortable people follow conservative investing principles. One reason some people can maintain high levels of wealth is that they invest conservatively. This principle is especially true for retired individuals who spent decades creating a portfolio diverse enough to support them for many additional years after they stop working and earning.
Many financially comfortable adults use dollar cost averaging to grow stock portfolios. In other words, they budget a specific amount for stock purchases each month, not caring about the number of shares their money buys. Others make automated deposits to brokerage, savings, and other long-term accounts to maximize growth over the long haul.
The Stock Market is Highly Volatile and Uncertain
In the long run, equities exchanges deliver solid, attractive returns. It’s easy to get a wrongheaded impression of the equities markets by observing an isolated month or year of price action, the volume of shares traded, splits, and dozens of other parameters. While the 2023 global equities markets are indeed volatile and unpredictable, a long view of these same indexes tells a different story. For a given 50-year span, corporate shares tend to perform as well or better than any other group of assets, including forex, commodities, precious metals, and many more. One factor that attracts so much investment capital toward the equities markets is long-term price stability, solid value, and potential growth.
Life Insurance is a Waste of Money.
Policies can be structured for many purposes and help with portfolio diversification. Life insurance is widely misunderstood, partly because of the complexity of the various products offered under the general heading of insurance coverage. Individuals who want financial security, a backstop against emergencies, the chance to borrow from the built-up cash value in policies, and peace of mind for dependents turn to life insurance in its myriad forms. Term policies are not only affordable but also offer holders a large measure of financial security. Whole life is a choice for those who want more than just a death benefit.