Investors who are still years away from retirement are often plagued by a nagging fear. When they stop working, there won’t be enough income coming in.

This underlines the fact that successful retirement planning begins well before you approach retirement age. There is one plan that we have found is more effective than any other in preparing a secure retirement. It begins during your working years.

Dollar-cost averaging helps you buy more shares at low prices

The best retirement plan you can have is to start saving as early in your working career as possible. You then invest a steady or rising amount of that money in the stock market every year. When you follow this plan, you automatically profit from dollar-cost averaging. You will automatically buy more shares when prices are low, and fewer shares when prices are high

When you’re retired, you reverse the process. You live off your dividends, and sell stocks only when you need more money. When you do that, you sell your lower-quality holdings first. That way, your sales have the added advantage of upgrading the quality of your portfolio.

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Of course, you can improve your returns and cut risk if you structure your investing around our three-part approach at TSI Network. Invest your money mainly in well-established, dividend-paying companies. Spread your investments out across the five main economic sectors (Manufacturing & Industry, Commodities & Resources, the Consumer sector, Finance, and Utilities

And downplay or avoid stocks in the broker/media limelight. That limelight tends to push up investor expectations to unrealizable levels. When unpleasant surprises come along, they can have a brutal impact on prices of these stocks.

Trying to improve this plan could have the opposite effect

The funny thing about this financial plan is that you can actually make it less effective if you try to improve it. For instance, you may decide to vary how much money you invest every year, depending on your view of the market outlook. And that’s likely to cost you money at least half of the tim

If you invest more money in years when you’re confident about the economy or market, you may wind up buying more shares when prices are high. If you cut back on your investing in years when the outlook is uncertain, you’ll buy fewer when prices are low

In the course of your investing career, you’ll make some good guesses about market direction, and some bad ones; overall, they are likely to average out. That’s why it’s best to stick to your plan no matter what the market does. It’s much easier to spot high-quality investments than it is to try and predict the next shift in the direction of share price

This plan is virtually guaranteed to produce great results for you, if you start early and stay with it. Unfortunately, few investors do that. Many investors simply run into too many ways to get sidetracked, and fail to stay with that steady—and successful—approach.

COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members

Do you believe the chief goal of investing is to build security and peace of mind for your retirement, or do you believe you should enjoy the benefits of successful investing before you reach retirement age? Let us know what you think.