Instead, you are well-advised to grow your money by diversifying your investments in your retirement years. You must, however, be careful about taking on high investment risks since you are less likely to recover from the blow.
When diversifying your retirement portfolio, you must carefully consider your:
- Overall investment plan
- Risk profile (i.e., low or moderate risk)
- Financial status (i.e., sources of income, such as Social Security, pension, and savings, and recurring and expected expenses)
When you have considered these factors, you can then keep these sound investment tips in mind:
• Go for balanced mutual funds, which provides a balance between stocks and bonds. Consistent returns can be enjoyed with a 20-40-40 ratio for stocks, bonds and savings, respectively.
Stocks are essential for long-term growth since these have higher returns than the inflation rate. Bonds act as risk mitigators against stocks because these provide for guaranteed results; choose Treasury bonds and corporate bonds with good returns while avoiding junk bonds.
• Check real estate investment trusts (REITs) for income generation and portfolio diversification purposes. This is because REITs should pay out 90% of their net income in shareholder dividends, thus, the guaranteed returns ranging from 4-6%.
Just be sure to choose REITs with good diversification in both type of commercial properties and in their geographical locations.
Talk to your financial adviser about your options so that you can make smart decisions that your descendants can follow and benefit from in the future.