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Obviously, I do not want you to destroy your retirement! However, it is good to think about what you can do incorrectly that will hurt your financial future. By studying the mistakes, you can hopefully avoid them.

Yahoo Finance had a great article on the subject. You should jump over and read the entire article but here are the five ways that were identified.

  1. Too much debt.
  2. Spend your retirement savings on college.
  3. No emergency plan.
  4. No long-term investment strategy.
  5. No retirement plan.

All of these are bad choices. If I had to pick a 6th one it would be to trust that the US government was going to provide for you. This is not a political site and I do not want to get into political arguments. I do encourage you to be pragmatic if you are under the age of 55 and definitely under the age of 40. Assume that Social Security as it exists at this writing will likely change before you need it.

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Company name Annaly Capital Management, Inc.
Stock ticker NLY
Live stock price [stckqut]NLY[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Good
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $24.93
Target stock price (averages with growth) $25.98
Target stock price (averages with no growth) $21.49
Target stock price (manual assumptions) $24.15

The following company description is from Google Finance: http://www.google.com/finance?q=nly

Annaly Capital Management, Inc. (Annaly) owns, manages, and finances a portfolio of real estate related investments, including mortgage pass-through certificates, collateralized mortgage obligations (CMOs), Agency callable debentures, and other securities representing interests in or obligations backed by pools of mortgage loans. Its wholly owned subsidiaries offer real estate, asset management and other financial services. The Company’s subsidiary Fixed Income Discount Advisory Company (FIDAC) is an investment advisor registered with the Securities & Exchange Commission (SEC), is a fixed-income investment management company specializing in managing fixed income investments in residential mortgage-backed securities, commercial mortgage-backed securities and collateralized debt obligations for various investment vehicles and separate accounts.

 

Confident Investor comments: At this price and at this time, I think that a Confident Investor can confidently invest in this stock.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

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On a regular basis, I talk about paying yourself first. I discuss it in my book, The Confident Investor, and I have mentioned it on my site multiple times. I was very impressed with Philip Taylor and his article on the subject. What he said was 100% accurate and everyone should follow his advice.

He points out that paying yourself first is essential for doing the following:

  1. Want to get out of debt?
  2. Want to have an emergency fund?
  3. Want to have money to set aside for a down payment or a vacation?
  4. Want to afford retirement one day?
  5. Want to give your kids some money for college?

I personally think that just paying yourself first is not enough to retire comfortably. You need to have a plan that increases that savings faster than the market grows. That is where my book, The Confident Investor, teaches you to grow that savings. You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in e-book formats for Nook, Kindle, and iPad.

Jump over and read Mr. Taylor’s advice. Start paying yourself first so that you can start investing. After you have developed a bit of a nest egg, you can start investing by following the advice of my book.

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Company name Cogent Communications Group, Inc.
Stock ticker CCOI
Live stock price [stckqut]CCOI[/stckqut]
Confident Investor Rating Poor

The following company description is from Google Finance: http://www.google.com/finance?q=ccoi
Cogent Communications Group, Inc. is a facilities-based provider of Internet access and Internet Protocol (IP), communications services. The Company’s network is specifically designed and optimized to transmit data using IP. The Company delivers its services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in North America and Europe. The Company offers on-net services in over 175 metropolitan markets. The Company serves over 1,740 on-net buildings of which more than 1,470 are located in North America with the remainder located in Europe and one located in Japan Its on-net service in North America is its Fast Ethernet service, which provides Internet access at 100 megabits per second. It also offers Internet access services at higher speeds of up to ten Gigabits per second. These services are generally used by customers that have businesses, such as Web hosting, that are Internet-based.
Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in this stock. It is not possible to confidently invest in a company that is not currently profitable.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

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The money that you invest in stocks needs to be money that you do not need immediately. This does not mean that it is not money that you will not need for 20-30 years. If you have money that you are confident you will not require for decades, you should probably invest that money in your own home. Follow the old Benjamin Franklin saying, “A penny saved is a penny earned.” (Yes, I know he probably didn’t say this).

If you currently pay 7% interest on your home loan, any extra money that you apply to your mortgage will immediately give you a 7% return for the balance of your mortgage term. Therefore, if you pay a one-time extra $1,000 on a 7% mortgage that has 23 years left on it, then it will result in $5,002.04 that you did not have to pay over the course of the 23 years. This is a guaranteed return: over the course of 23 years you will be more than $5,000 wealthier due to that one-time investment.

Your home mortgage is the safest “buy and hold” investment that you can make! You already know that you pay a certain percentage. If you pay the loan off early, you effectively get that loan percentage as an investment return.

The same logic also applies to your auto loan and credit cards. This is typically more short-term debt than your home. Quick payoff on any short-term debt will guarantee you the quickest and best investment strategy. You are not spending those pennies, you are saving them. Benjamin Franklin will be proud of your efforts to pay off your short-term and long-term debt quickly and efficiently.