subject: Building an Investment Portfolio for Retirement [print this page] It used to be that retirees looking for investment advice were pointed in the direction of "safe" certificates of deposit, bonds, and some blue-chip stocks to put their payouts and savings into. The past couple of decades have seen seniors experiencing active and relatively longer retirement periods, and being advised to increase exposure to the stock market to get bigger returns, not to mention hedging against inflation. This conventional mindset towards investments may have had its heyday, although today's current economic climate makes the previously accepted approach obsolete. You can still generate returns consistently and lower risk to build your investments for retirement with another approach.
Longer lives requiring the generation of high and consistent returns on investment is correct. While stocks usually go beyond fixed-income investments in terms of gains while giving you a buffer against inflation, the plain addition of stocks to a portfolio can be problematic for your finances. This is because you're developing an unvaried portfolio composed of similar assets - these stocks will tend to rise or fall in value in a related pattern, giving your finances a significant hit should stock market conditions drop.
The key to building a consistent and stable retirement portfolio is diversification. Adding different kinds of assets that can guard against inflation and give better returns than fixed-income investments can go up in value if your stocks go down. Recommended asset classes include promising market bonds and market equities, as well as international bonds, although you can't go wrong with real estate investments and commodities making up a minimum of five percent of your portfolio.
Taking high degrees of risk shouldn't be done when you're augmenting or building your retirement funds with investments. On the other hand, playing it too safe can be even riskier. Vary your portfolio and help strengthen your retirement finances by gradually adding various investments to reduce overall risk. Contact your financial advisor or investment planner to know what investments you can make, and what amount of risk you can handle towards a better and stronger retirement portfolio.
Building an Investment Portfolio for Retirement
By: Carina Smith
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