Staying the course isn't always easy

Like many people I think September feels like the beginning of the New Year. Kids are heading back to school and new projects are gearing up at work now that summer vacations are over. In other words, September is a good month to review household finances and make any adjustments (if needed).

The review should include going over your retirement savings plan. The good news is portfolios are on the rebound. That's the message in a second-quarter data analysis recently released by Fidelity, the financial-services giant. The average retirement account balance at Fidelity increased for the third straight quarter. All generations in the workplace enjoyed gains.

There is an important message in Fidelity's numbers: The rewards for consistently participating in a retirement savings plan. "Average long-term balances for five-, 10- and 15- year continuous savers saw double digit increases in their balances in the last year," notes the report. "Those who have been focused on consistently saving over the long term benefited the most from three quarters of growth."

Staying the course isn't always easy. Think about the shifts in market sentiment recently (let alone the last five and 15 years). Prospects for the economy have ranged from secular stagnation to imminent recession to soft landing. Some well-known financiers predicted inflation might go higher than the double-digit rates reached in the early 1980s. The consensus now leans toward the Fed's hitting its target range of 2% next year.

The uncertainty is endemic. But a commonsense framework has emerged to guide the investment decisions of the typical employee saving for their retirement. The advice is designed for people who work hard at their jobs, raise families and socialize with friends, and who don't think reading financial briefs makes for an enjoyable evening.

The key insights are trading is hazardous to your wealth and managing risk is critical. The practical implications of this perspective are: Focus on asset allocation; maintain a well-diversified portfolio; keep fees razor thin; own low-cost, broad-based index funds and high-quality fixed income securities; invest regularly (dollar cost average); and (as soon as it's practical) take maximum advantage of your retirement plan savings limits and employer match.

You will do well with this approach and, at the same time, have more time to devote to more rewarding activities.

Chris Farrell is senior economics contributor, "Marketplace"; commentator, Minnesota Public Radio.