How we live in our golden years ought to reside more on the golden side, without any inclination towards penniless living. The comfort with which we live in our post-employment years depends mainly on how we plan for retirement today. Retirement planning requires you to identify your income goals and to then work towards reaching them. Most of us craft our retirement income to grow from a well-planned investment portfolio.
A balanced and diversified investment portfolio is considered the best course of action for retirement savings. This means a healthy combination, of among other things, stocks and bonds. Principally, the goal is to own shares in companies of varying sizes, from a myriad of areas and industries, with both growth and value shares. Bonds can and should also be diverse. For your portfolio, this means owning corporate, treasury and government agency bonds with a variety of maturities.
Your financial planning must contain a degree of understanding on your part. If financial lingo is overwhelming, any financial advisor will happily walk through your portfolio with you. However, an expert should never suggest that you do not attempt to educate yourself regarding your portfolio. The very real probability that your investments will experience an economic downturn must be met with an investor knowing how to minimize the risk to their savings, with or without an expert’s assistance.
Today’s market has been steadily improving with investors happily watching annual returns, and stock prices climbing sharply since the market hit bottom roughly nine years ago. Regrettably, those enormous financial benefits will not last forever. In contemporary economies, recessions are understood to be a regular part of the fiscal course. What many investors fail to realize is that recessions not only lead to job loss and economic decline, but also to investments being affected. One can almost guarantee that with an economic downturn, investments will suffer.
Although it is typical for the stock market to experience highs and lows, the real problem rests with investors trusting that future gains will be roughly comparable to those of the last few years. Add to this market misunderstanding is the number of investors who will misread the amount of money they will require for a comfortable retirement. Despite numbers of investors trusting they will have enough to retire, even more, investors are ignorant of current market speculations that returns will be far lower in the coming years. Wise investors will hear these speculations and act now to minimize their risk in the event of an economic downturn.
So, what can you do?
Align Savings with Risk Tolerance
With the anticipation of a drop in the market over the next few years, the worst move is to invest in volatile stocks. If you are already aggressively investing, your next step will be to re-balance your portfolio to reflect market predictions, based on your needs.
What Can You Live Without for the Next Few Years
Avoid the pressure to pull all your investments out of a dropping market, instead structure your finances to outlast the tempest. Invest any savings you will not immediately require for the next five or so years. This will allow you to leave those funds on the market until it recovers.
Cash, Silver, and Gold
Cash is a neutral asset, minimizing any contact your investments will have with market instability. Cash on hand will also set you up nicely to purchase stocks after a decline when prices will be ripe for the buying. Thought of as one of the best assets in which to invest, regardless of the market, precious metals will remain fiscally counter-cyclical and a smart investment decision.
Never lose sight of the bigger picture. Your investments must respect the career you worked so hard at, and the life you wish to live in future. Mastering the art of retirement investing is the last step towards a bright future, the one you deserve.