Do you accept advice? Do you listen when someone helps you learn from their experiences? Are you willing to work hard for a goal? These are the attributes of the wise man or woman.

Proverbs 12:15 (ESV) – “The way of a fool is right in his own eyes, but a wise man listens to advice.”

Proverbs 12:24 (ESV) – “The hand of the diligent will rule, while the slothful will be put to forced labor.”

Recently a member of the Fidelity Investor Community asked a question. They wanted wise, seasoned advice for a younger family member regarding the best ways to grow retirement assets. I responded with ten points. The key elements in these are planning, discipline, wise living and continual learning. The ten points are the actions my wife and I took along the path towards retirement. These also make it possible for us to give more now than we were able to give in the past. To use a boating metaphor: You can’t drift into success. Set a course and then hoist the sails or turn on the engine and steer towards the destination.

Here are ten actions that made it possible to accumulate a sizable net worth, including 401(k) assets:

  1. If your employer offers a retirement plan, take advantage of the full company match. The early money is very powerful. It compounds when invested wisely.  If you don’t have this benefit, open your own IRA or Roth IRA and set it up for automatic contributions from your income.
  2. When or if you move to another company and roll the 401(k) into my own self-directed IRA. Repeat three times or as many times as it takes. This enhances your career with variety and new challenges as well. It is helpful to be stretched.
  3. Reinvest dividends automatically when the price is low. Turn off automatic reinvestment when you are ready to invest dividends in other ways or when you need to start withdrawals for your RMD.
  4. Avoid the common thinking and advice. For example, don’t believe the thinking of the herd that says, “rebalance your account.” That can be nonsense for a person with a long-term perspective.
  5. Sell your position in your employer’s stock as soon as you can. In my case it was Sensient Technologies (SXT) where I worked 23 years. Diversify into other companies with a better growth path. Did this in 1999.
  6. Buy less house and pay off the mortgage quickly. Don’t give money to the bank, invest it instead. We paid off current home in less than 7 years. Your house is probably not an investment. It is an asset.
  7. Buy dividend growth stocks, ignoring the current yield but being careful to look at the dividend payout ratio. The snowball grows as it rolls along.
  8. Never sell in a panic. That is the world of the trader, not the investor.
  9. Educate yourself. You can learn. Get smarter and use smart tools like “Weiss Ratings.”
  10. Have a written investment plan and stick to it. In writing is the only way. Sticking to it doesn’t mean you cannot adjust it, but it means you don’t make changes without adjusting the plan.

We started contributing to a 401(k) in the late 70’s and increased the contribution with each raise.

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