How you save and invest towards your retirement is just as important as how much you save. Inflation is one of the key factors to consider, while adopting a diversified income-generating strategy for investing. The type of investments you make determines how much you will have saved at retirement. By diversifying, you reduce risk income and more likely improve return.
Fixed income & money market investment:
These are considered low risk investments, thus a retirement planning portfolio should have a mix of instruments in this assets class to maximize effective yield. While fixed income investments are good for a steady stream of income, it may not always be enough to sustain a retiree’s standard of living, especially with inflationary consideration. These instruments included federal government Treasury bill, bond and fixed deposit.
Property Investment:
Investment in properly is arguably the best hedge against inflation. Also, because it is expected that properly prices will always appreciate (except in times of war, natural disasters or acts of God), buying property to sell in the future is also a profitable investment option. Owning property can also be an immediate source of cash flow through rental income.
Stock:
Though considered risky, if you can start planning and investing early, it is important to have some allocation to growth and income stocks that are also historically defensive to market volatility. For the growth stocks, you expect the price to appreciate substantially, so you can sell in the future and make profit; while the income stocks generate income in form of dividends. Whatever assets you choose to invest in, the key factors to consider is the time you have left to retirement, the importance of capital preservation, the income-generating capacity of the asset class as well as the estimate duration of your life after retirement. Source Meristem Wealth Management
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