When it comes to investing strategy, your age should be counted as one of the most important factors in forming the way you approach building a portfolio. While younger investors still have a salary that allows them to recover from more risky ventures in the stock market, older individuals or the recently retired need to tailor their allocation of stocks in a diversified way.
Ideally, this would look like a combination of companies that have above market average dividend return. But not everyone is savvy enough with todays markets to hit this golden combination on their own. That is why we have compiled a guide of these five under-looked strategies and assets that best suit the retired investor.
Consider Moderate Changes –
If you already have a portfolio before retiring, it is not always necessary to make big changes to the stock listing that you are currently in. For those first years of a hopefully long retirement, it is wise to make small adjustments, amounting to perhaps a 5-10 percent change in holdings. For example, if you plan to withdraw a moderate amount of your savings each year, say 3-5%, then adjusting for inflation you should be able to maintain your balance with a standard low risk portfolio. This should keep your initial years as stress free and gilded as possible. Consider the major and most important costs first such as dental senior insurance and then subsequently more luxurious ones.
Credit Investments –
Corporate bonds are one of the best-kept secrets in the retirement investment world. Most retired investors only consider stocks and equities. These credit investment products, when purchased through an intermediary such as an investment bank or hedge fund, offer the passive investor a relatively lower risk option to the more volatile equities markets. Some of these bonds can return as much as 12% a quarter, making the investor who helps fund these firms a handsome profit even after the rather expensive service fees.
Diversified Wealth Managers –
Rather than stressing while you should be enjoying your retired life, consider hiring a team of professionals to allocate your funds for you. There are many wealth managers today that specialize in low-risk sustainable investments designed to accomplish retirement plans. When speaking with wealth managers, ask for a reasonable blend of stocks and bonds that match your unique tolerance for risk and life plan.
Diversify Broadly –
Diversifying means more than just investing in both Stocks and Bonds and many companies and industries. Your diversification should consider factors such as quality grade of the investment, age of industry in which you invest, low risk and high risk. This strategy will cover your bases in the case of a financial crisis because these downturns rarely affect the young and old companies in the same way.
Index Funds –
U.S stocks and bond market index funds are the easiest way to achieve the type of diversification that allows retirees to thrive in all types of market climates. You will tap into a part of most of the companies that are traded publicly with ease. Many long time retired investors have nearly double and tripled their nest egg via this conservative method.