Retirement Portfolio

Retirement Portfolio

Do You Need a Retirement Portfolio?

The market has turned bearish – meaning retirement investment prices are falling and the mood of investors is pessimistic – which has put many people’s retirement portfolios, and their retirement dreams, at risk.

Whether you’re retiring soon or just beginning to build a retirement portfolio, today’s market demands careful planning and smart decisions.

You may be asking yourself if it’s worth investing your retirement investments at all – you may have a well-paying, solid career, be a disciplined budgeter, and be wondering if you can avoid the risks of a retirement portfolio by relying on your retirement savings alone. You know how much you can live on, and you’re putting enough away to provide you the same budget after you retire.

The catch in this plan is inflation. If you’re going to keep up with the rising cost of living, a fixed income may leave you with a steadily declining standard of living. Once you retire, you’ll be your own boss, which means you’ll be paying your own salary. To keep up with rising costs, you’ll need to be able to give yourself raises – and a retirement portfolio can be a source of growing retirement income.

Diversify Your Retirement Portfolio

The retirement income portfolios that do the best in bearish markets are ones that are the most diversified. The route to a diverse retirement portfolio isn’t always obvious. Investment advisers point to three common mistakes that get in the way of a truly diverse retirement portfolio:

  1. Relying on individual stocks and retirement bonds. If your retirement investments are all in the same asset class, you won’t have risk-proof diversity. It’s worth looking into a money manager or retirement mutual funds to have the right research on your side.
  2. Using similar mutual funds. Many mutual funds cover the same investment ground; make sure your retirement portfolio is built on truly diverse foundations.
  3. Putting all your money in one style of investing, like value or growth. It’s important to diversify against trends as well as against individual investments.

The Costs of Diversifying Your Retirement Portfolio

The problem with working with retirement mutual funds and brokers is that they may charge 1-2% – if you’re working with both, that’s 2-4% per year coming directly out of your investment performance.

Exchange traded funds (ETFs) can be a good way to reduce fees. An ETF tracks an index, but can be traded like a stock. ETFs are more tax-efficient than normal mutual funds, and since they track indexes they have very low operating and transaction costs associated with them. There are no sales loads or investment minimums required to purchase an ETF. Ask your investment advisor for more details.