You Are Now A Retiree? So What Are The Steps To A Sound Investment Plan?
12 Jun 2017, Monday
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So you’re retired. Now what?

It is no secret that retiring isn’t cheap.
So, what does it take to retire comfortably nowadays?
How can you be sure that your investments will give you a good retirement, and a secure one for that matter?

Headlines globally often discuss the lack of retirement planning and we are now seeing a generation of employees working beyond their perceived retirement age.

So why is it, that people shy away from making their money grow?
A common theme that pops up is that the hesitation to investment comes from an overall lack of market knowledge or the insecurity of the risk and integrity of various investments.

In the face of challenging global economic conditions, ever-increasing inflation and stagnant wages, making the right investment choices matters more than ever.

 

This article unravels 3 important factors you have to consider when planning an investment for your retirement.

3 Crucial Tips To Making A Sound Retirement Investment Plan

1. Know Yourself And What You Are Investing For

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Knowing yourself and the clear purpose of your investment is the key to finding one that works and earns for you.
The reason many have made bad investment choices and end up losing money when they have failed, is a lack of understanding of their investment choices and the suitability of them. Understand what is expected of you and what is at stake before making a decision. How long do you expect to be involved in the investment and what do you expect to be involved in the investment and what do you expect to achieve at the end of the investment term. Another important factor to consider is how involved you want to be. 

Are you an active or passive investor?
Some investors are only interested in making and growing sound investments. Often, retiree investors are not too keen on monitoring them regularly or pouring financial reports. These passive investors opt to be kept up to date on the latest developments, but implement a hand off approach.

By taking into consideration all of the above factors and how it fits into your overall plan, puts you in a strong position to find the solution that is right for you.

 

2. Formulate A Plan, Build An Investment Portfolio

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The key to creating a well-balanced retirement investment portfolio with a few funds is to keep it simple.

Make a decision. What are you investing for?

Many retirees have a savings pot they want to invest with and we all know it's important to make our money work hard for us. However, if you don't understand why you are investing, then ultimately, you can't make a well balance decision based on what you want to archieve.

If you choose to diversify your portfolio, then the likelihood is that you may opt to be a passive investor. The benefit of this is that you sit back and allow your investments to mature. 

What is passive investing?
Passive investing means an investor is least concerned about market prices, they just invest for a certain term length and earn the market return.

Today we shall unravel why investors should be utilizing this formidable investment method.

What are some of the advantages of passive investing?
1. No need to monitor portfolio or market entries aggressively

2. Less human errors

3. Lower potential loss in major market downturn eg. stock market down turns due to bonds price fluctuations

4. Flexibility to sell off bonds that are doing well in exchange for buying cheap stocks in larger quantity.

5. Long term returns with lower risk (compared to pure equity portfolio).

Just beginning to think about what you need to do may be the hardest step.

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3 Tips for foolproofing a retirement investment portfolio

a. Identify & compare your income and expenses to determine any shortfalls or surpluses

b. Automatic rebalancing
Now that you’re retired, your priority should be ensuring that your money is working at the highest possible pace. Hence, we need to continue selling high and buying low- which is what automatic rebalancing is about. A target date fund will rebalance automatically.

c. Don’t be afraid to ask for help
If you are in or nearing retirement, engage the services of a financial advisor. The best financial advisor will ensure that all of your retirement financial planning is built on the foundation of your personal priorities and goals.


Action steps to building your retirement portfolio

4. Adjust Your Retirement Investment Strategies Appropriately

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What can we do to adjust our retirement investment strategies and make sure they are on track with our inflation forecast for the year? 


a. Define your investment objectives (see point 1)

b. Be sure to plan and keep track of the time horizon of different types of investments

  1. Aim for your overall retirement savings in proper alignment with your country's inflation
  2. Assess your risk
  3. Add small or undervalued company stocks to the mix in order to increase returns

c. Be a passive investor but have an active ownership of your investments. This means rebalancing periodically and bringing your retirement investment portfolio back to its intended allocation. You should be constantly aiming to reduce portfolio volatility.


Today, we outlined and covered the fundamental basics to a sound retirement investment plan; we hope you see its importance and are ready to embark on a fruitful and rewarding plan.

Good luck!

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