Skip to main content

How Diversified Investments Are Beneficial in Retirement

What many people don't understand is the importance of saving for retirement earlier on in their lives. The sooner you start with a retirement plan, the bigger your retirement investment will be. However, a lot of retirement plans only stick to investing in certain market segments.

At times the market segments that you are investing your savings in do not grow due to any number of reasons. That is why it is important that your financial advisor hedges your retirement investments against the volatility in the market and diversifies your investment.

Diversification is very important in investment and that is why financial experts deem it the most beneficial way to invest your money, especially if it is a retirement investment fund. The benefits of diversifying your retirement investments are many.

What level of risk are you comfortable with?

If you have a long time to go till your retirement then you can safely assume more risk in your retirement funds portfolio. Higher risk always translates into higher returns. On the other hand, if you have less time to your retirement then it would be better to take a more risk averse to investment and invest in places like the shares of blue chip companies, real estate, etc. Risk averse may not translate into very high returns, but the diversification will result in decent, long-term and steady returns.

Allocation of investment in stocks and bonds

Stocks are more volatile than bonds, but also have higher returns over the long run. Bonds on the other hand are not as volatile and will hedge your investment against the volatility of stocks. A combination of investment in stocks and bonds results in much higher returns that simply putting your money in the bank's saving account or buying term deposits. The percentage return on bank products is always less.

Investing in foreign stocks

Adding foreign stocks to the portfolio is a great move. But make sure that you have studied the market and companies that you are investing in. Every country's stock market moves in a different direction. Foreign stocks yield higher returns if invested correctly.

Investing in large and small companies

Many investments are diversified by a mix of stocks and dividends of large and small companies. This is done to make the investment safer. Some small companies have good potential returns in the future.

Financial experts will tell you that diversification is very important for any investment fund. The reason behind it is that diversification offers security against market volatility and makes sure that your investment earns something in the long run. Putting all investments in one place could result in a big loss if the market falls. That is why it is said Don’t put all your eggs in one basket.

Author: Allan has been writing about personal finance and retirement planning for the last 3 years. He specialises in smsf and retirement strategies.

Comments

Popular posts from this blog

Low interest credit cards - how to make them work for you

Credit cards are borrowing instruments, unlike debit cards where you already have the money. Banks are there to make money too. Just like high street stores, they hope to maximise their profits within the rules. So it’s important to understand the basics and find a credit card that’s right for you – you can compare low APR credit cards here . Now you know the rules, let’s find out how to play the game. The financial services industry charges interest on the money that it lends out. Let us assume you borrow £100 on your credit card and keep it for exactly one year before you pay it back. For the purposes of this article, we will assume your loan attracts 8% interest per year, which is the Annual Percentage Rate, or APR for that particular transaction. Practical example

Why it’s important to save for retirement

While retirement may seem far off in the distance for some, financial experts say you’re never too young to begin saving.  In fact, the earlier you calculate your retirement needs and start building your nest egg, the easier it will be to create a viable plan for the future. Many experts advise you begin saving a percentage of your income for retirement as soon as possible, no matter how little the contribution may be, as it’s possible the Social Security benefits millions of people currently depend on may be in jeopardy.

How does a Prepaid Credit Card work?

Can They Really Be a Solution to Avoiding Credit Card Debt? When it comes to plastic, there are a lot of choices out there. Not only do you have the choice of credit card , debit card, or prepaid credit card, but you also get to decide which financial company you want to use as your card provider. Credit cards and debit cards are both risky. Credit cards can help put you deeper into debt, while debit cards give thieves and collectors access to your entire bank account. A growing number of people are finding that prepaid credit cards are becoming the best option. What Are Prepaid Credit Cards? Prepaid credit cards look and act just like a credit or debit card, except you put the money on the card before you make any purchases. You are only allowed to spend as much money as you have pre-loaded on the card, which means that you are not at risk of going into credit card debt from overspending. These cards also keep your money safe, because thieves will be limited to the amount that is on t

What are the Consequences of Overspending in Life?

How overspending can ruin your financial life? With today’s expenses and their prices, it can be very hard not to overspend. Still, that isn’t an excuse to stray out of your budget. You know why? It is because overspending can only lead to more problems than you think. Overspending can affect your whole life. With all the possible consequences, it may jump from one problem to another. Unpaid bills All the excessive shopping with your credit card can cause steep bills at the end of the month. If you keep on using your credit but don’t have enough money to pay for it in the end, then you’re surely in for a huge financial disaster. This will turn out to be missed payments, and missed payments will ruin your credit report. Missing out on payments will get your credit report marked for 7 years or more. And you can’t get rid of them by finishing them off. Credit report Overspending can cause a chain reaction of events. Once you get your bills due to overspending, it’s possible for you to mi

How to Make Your Title Loans Safe and Sound

Although title loans are tagged as risky, innumerable folks still use them for fulfilling their different financial obligations. Therefore, such loans are not completely bad because their significant use despite the risk factor says a lot of their pros. This makes it vital to discuss how these loans should be used so that the risk factor can be minimized up to a great extent. For those who are not aware of, the risk of title loans crop up in the form of consequences when you fail to pay back the loan. With such a failure, you are surely going to lose your car as well as decrease your credit score further.

Online Small Lenders and Grants For Women

In today’s world women are being more and more prominent. They are hard working mothers. Some are even working to support their entire family because they are single moms.  However the financial aspects of being a working women can be traumatic. Depending on the society you live you women may find it that they are not allowed to work or go to school.  Often times they are kept inside their homes to keep the household running smoothly. However most women find that they can be successful outside of the home and inside the home often doing both at the same time. They are working mothers who are often going to school to better themselves while working in the corporate field. For more information click here .

Money Moves: Imagine Playing Your Financial Life like a Chess Game

To say chess is a popular game would be a gross understatement. Chess, for at least 1500 years, has been considered to be not just a game, but a true test of intellect and character. One can learn a great many things about chess that can be applied to one’s life, not the least of which is one’s personal finance. Chess is a game that requires patience, foresight, and an ability to understand your opponent. Much like your personal finance, these qualities are required for you to come out on top in the end. Here are a few things you can take away from playing chess and use to improve your financial life: