Investing for Your Retirement
There are many different investing styles available on the market. These investing styles have a lot to do with where you are in your life. If you are still in the prime of your career or you just started in your career, you can probably afford a lot of volatility and risk taking in your investment portfolio. If you are investing for retirement in the long term, you can include a lot more risky investments in your portfolio. This makes a lot of sense because the stock market and investment world in general operates along this cardinal rule: The higher the risk, the higher the reward. If you take a lot of risks, chances of your money growing quite a bit increases. However, if you are close to retirement age, you can take less risks. If you are investing for retirement and your retirement is only a few years away, you have to use some more conservative approach. You would be better served if you invested in investment options that have less return, but are less risky. We are of course talking about municipal bonds, government bonds and other historically low risk investments. Regardless of whether you have a high appetite for risk or if you are close to retiring, investing for retirement should factor in the following considerations.
Know Your Retirement Horizon
Even if you are going to be retiring in a short period of time, you have to know your retirement horizon. What kind of standard of living would you like to enjoy once you no longer have an active income. What kind of retirement lifestyle would you like to enjoy. You have to factor this in, in regards to investing for retirement so you can get the outcome you’d like. A lot of people think that investing for retirement involves using a certain tried and proven formulas. The problem with formulas is if you use formulaic approaches, you will get formulaic results. If you want a particular retirement lifestyle that would be the envy of your friends and neighbors, then you need to be a bit more proactive when investing for retirement. Keep in mind that this doesn’t necessarily mean that you have to throw away everything you’ve learned out the window, no. All it means is that there are a lot of other investment options on the table. You would only need to invest a lot more time, effort and resources to finding these short term retirement investment options to get returns that you are looking for. Just because you are pursuing a very conservative investment strategy, doesn’t necessarily mean that you can say goodbye to decent returns. Not by any means, while you can see yourself retiring shortly, this doesn’t necessarily mean that you should expect to make as little money with your hard earned assets as possible. There are options out there that can fit your retirement horizon and still produce a good return on investment.
Know the Appropriate Risk for Postures You Should Take
As mentioned above, if you are younger and you are investing for retirement, you have the luxury of taking more risks. Of course, the more risks you take, the higher the chance that you will get a higher return on your investment. This goes with a territory. Once again, the higher the risk, the higher the return. With this said, you can vary your risk posture depending on the state of the economy, also depends on inflation. You can take an appropriate investment posture that will enable you to make quite a bit of money if the market crashes or if the market recovers. There are certain risk profiles you can take that will enable you to ride the market up and ride the market down. Many people would roll their eyes at the concept of riding the market down. This should not be a surprise, after all most people tend to play the stock market long. In other words, they buy and hope for stocks to appreciate in value and then they cash out at a future date. This is the way most people invest. However, if you are investing for retirement and you are looking to maximize your return on investment, you might want to try an alternative approach. Investing for retirement in such a way that enables you to ride the market down involves investment strategies that might not be intuitive. The good news is that regardless of whether you are investing for retirement in 5 years or investing for retirement in 20 years, you can establish a portfolio that is both “safe enough and risky enough”.
Establishing a “Safe Portfolio”
One of the safest portfolios that you can establish especially during periods when the stock market is booming is a portfolio that is heavy on precious metals. There are certain investments that have been viewed as historical stores of value. Gold, platinum, palladium, silver and other precious metals have historically appreciated in value when the stock market goes down or inflation spikes up. This is what makes them safe. They will always have value and people would always want them. Of course, the ideal situation is for you to sell precious metals at a profit and depending on how you play this type of investment, not only do you increase your chances of making money with this investment, but you can also position yourself well to take advantage of a depressed market. This is why a portfolio that is heavy on precious metals can be deemed “safe enough” if it is balanced with equity source stock based investments. A properly diversified investment portfolio will include bonds, stocks and precious metals among other assets. These types of investments have their advantages and disadvantages. These types of investments tend to do well at certain times. By distributing your risk profile among these different types of investments, you not only protect yourself against adverse market conditions, you can also set yourself up for great opportunities in the future. Precious metals in particular can set you up in such a situation where if the market crashes and inflation spikes up, you can cash out of your precious metal positions to buy stocks there cheap. When you buy stocks at a low enough price, you can then ride up any short term appreciation in stocks. Keep in mind when the market crashes, the market actually bounces up in predictable gyrations after the initial shock. When you are invested in precious metals, you can ride these market gyrations up and down and make money each time. You can’t say the same thing if you are invested only in stocks.
Putting Together a Portfolio That is Well-positioned for Opportunities
The problem with reinvesting in real estate is that while real estate holds its value during high inflation times and when there’s a market crash, it can often take a long time to sell real estate. It’s not uncommon for investors to miss most opportune time to get rid of real estate assets. If you miss this window opportunity, you might be only able to sell your real estate positions at less than optimal prices and once you have liquidated your real estate holdings, you are left with not enough money to seize on stock market opportunities. The best way to ride a market up and down is to get in and out of investment positions as quickly as possible. Portfolios that are weighted adequately with precious metals components, enable you to do just that. It is very easy to buy gold, platinum and silver. It is also very easy to sell gold, platinum and silver. Precious metals are very liquid, that’s part of their appeal. This is why if you are looking to make money off the stock market when it crashes or when it goes through minor correction cycles. You simply can’t go wrong with investing for retirement with a decent emphasis on precious metals. With that said, you have to also diversify precious metal component of your portfolio. You can’t just park everything on gold. You can’t just diversify everything in to platinum. Even with a precious metal component of your investment portfolio, there should be a level of diversification as well. Keep in mind that not all precious metals perform with similar trajectory. Certain financial shocks or certain market realities can influence the overall investment performance of this different precious metals, keep that in mind.
Living with the Reality of Major Market Corrections
It is very easy to think of stock market crashes in terms of the market crash of 1929 or the great crash of 2008. In reality, there have been many different corrections and crashes in between these two famous stock market crashes. These slight dips and corrections in between inflicted their fair share of bankruptcies, financial pain, and ruin. There is nothing minor about these ‘smaller’ crashes. You can bet that the people who got crushed by them viewed them in the same way many people view ‘big’ crashes like those in the 20s and in 2008. Markets correct all the time, what goes up will go down. The good news is that if you are investing for retirement, you can play these gyrations up and down. You can play this market developments in such a way that regardless of the movement of the market, you make money. It’s all about positioning your portfolios so that not only does it preserve your asset values, but it also gives you the capital you need to quickly buy fast appreciating assets and then cash out. This is all focused on liquidity, you have to invest in securities or investment options that are easy to get in and out of. The last thing that you want is to freeze your investment capabilities by getting into real estate and taking a long time unloading real estate assets. Don’t get me wrong, real estate appreciates. Real estate beats inflation. Real estate goes up in value over time. The problem is unloading at the right time. If you are trying to ride a market for optimal returns, investing for retirement must be all about speed.
Keeping the End Goal Always in Mind
You have to always keep the end goal of investing for retirement in mind. When you’re investing for retirement, you are investing to cash out. You’re investing to enjoy fruits of your hard earned labor eventually at a fix date in the future. This is why it’s crucial to maximize the investment income of your retirement account while keeping it safe enough. It is very easy to gamble away your retirement investments. It’s very easy to fixate on maximum return on investment. However, by properly including safeguards like diversification in precious metals into your retirement packages and your retirement options, you increase your chances of retiring in style. Make no mistake about it, it is very easy to retire with a lifestyle that is worse than your current standard of living. If you want to preserve the standard of living you’ve grown a costumed to, you need to invest for retirement. Investing for retirement takes a lot of strategic thinking, it takes a lot of clear eye deplaning. The good news is that investing for retirement doesn’t have to be a mystery. There are many key and common strategies that you can employ today that can enable you to hit the target ROI that you’re looking for. Investing for retirement doesn’t have to be a hassle. Investing for retirement doesn’t have to be a mystery. You just need to be clear about your end goals. You just have to be clear about your objectives. Once you have reached that level of clarity, you can then put together a plan that you can tackle that can produce a decent return in the future. Of course, nothing is set in stone. Nobody can predict the market’s future. With that said, there are certain safeguards you can include in your retirement investment portfolio that will enable you to put yourself in a position to seize future investment opportunities.