Investing for your retirement shouldn’t feel like a roller-coaster ride, as media reports so often seem to project. While everyone has a different definition of what they’re comfortable with when it comes to investing, there are a few reliable ways to help smooth any ups and downs and adopt a more stress-free approach to building your retirement fund.
While there will always be a degree of volatility in any portfolio positioned to generate investment returns to reach a goal, these steps can help manage risk:
Bonds and other fixed-income holdings can contribute to investing comfort in all types of markets by providing a level of stability. In some periods, bond investments may be able to generate higher rates of income and a bigger overall contribution to portfolio performance. In other years, even if performance is muted, bonds may still provide stability in predictable rates. When equities suffer a down year, bond investments can often help provide a cushioning effect. That’s why the more conservative the portfolio, the larger the proportion of bonds, generally speaking.
You’re unlikely to feel comfortable with your investments if your portfolio is exposed to more risk than you are really willing to tolerate. Even if your portfolio was aligned with your personal risk tolerance when it was first established, has that changed over time?
For instance, stock market swings that seem par for the course in your thirties might cause fitful sleep in your fifties. Or life events could change your whole view on risk. Receiving an inheritance, for example, may reduce the level of investment risk you need to take, and perhaps call for a shift to a more conservative portfolio.
There’s good reason why professional investment managers diversify across asset classes, geographic regions, industry sectors, different-sized companies, and investment style. Over the long term, diversification helps raise the potential for returns and minimize risk.
With a diversified portfolio, a sense of comfort can come from knowing there’s a good likelihood that the stronger-performing investments can help compensate for any underperformers.
In contrast, investors who continually pursue hot markets or try to escape from underperforming markets can lose the benefits of diversification, and actually take on more risk.
If having equity funds in your portfolio tests your comfort level in accepting possible losses, you could consider investments with equity exposure that also offer guarantees. Segregated funds are investment funds with an insurance component that protects part of your capital. Of course, added security typically comes at a cost, which may mean higher management fees as a trade-off for the peace of mind.
It’s important to feel absolutely comfortable about your investments to be able to stay on track to reach savings goals. If you’re feeling any uncertainty, we’re here to help make any adjustments or review whether investments are suitable for your needs.
After decades of saving for retirement, here you are: and now, as a retiree, it’s all about stretching your nest egg to fund a comfortable lifestyle in a worry-free way.
The role of financial planning is no less important in retirement than it was in the years leading up to it, even though your goals may be very different. It’s all about understanding and making the choices that are most comfortable for you now — and we’re here to advise you every step of the way.
As you begin to depend on your savings for income, your lifestyle may call for different kinds of investments and financial strategies — insured annuities, tax-efficient income from corporate class funds, or the cash wedge, to name just a few possibilities. It may also be time to focus on certain needs, from long-term health care to estate planning.
Our goal is to see you enjoy your retirement, take care of your loved ones, and help you plan to make the best use of your resources.