Retiring changes everything. Your routine for the last 30 years is gone - you no longer have to battle through rush hour traffic, you no longer have to deal with office politics, you no longer have a fixed schedule that leaves little-to-no time to pursue hobbies and passions.
Amongst the positives, there is one worrisome negative 'you no longer have a steady monthly income to pay for monthly expenses'. You now have to depend on your savings and investments to see you through your golden years.
This shift from Steady Income to No Income gives rise to the question - 'Does retirement affect my portfolio and my investment strategy?'
The answer to this question is a resounding 'Yes'.
Every life stage and goal has an effect on your investment strategy. As a retiree, here are 5 tips on how you can still aim for returns while minimizing risks:
- 1.Play Safer Adopt a low risk investment strategy. When you are young, single and dependent free, you can take high risks; if you suffer a significant loss - you have time and income to recover. When you have a family who depends on you, you need to safeguard your future by adding low risk investments to your growth portfolio. When you are retired, you need to adopt a conservative strategy to minimize potential loss.
- 2.Strike a Balance You need to strike a careful balance between too much debt and too much equity. If you remain hyper focused on generating returns, you may run the risk of incurring losses from which you may not recover. If you only focus on debt, you may not be able to maintain your lifestyle.
- 3.Keep an eye on Inflation Inflation is the bane of life. It devalues money and reduces your purchasing power. To prevent inflation depleting your funds, you need to ensure your portfolio is generating inflation adjusted returns. Evaluate your portfolio regularly to ensure you don't run out of funds.
- 4.Consider Liquidity Medical emergencies are more likely as we grow older. You can consider investing in liquid or short term funds that liquidate quickly and easily. This may give you access to cash when you need it.
- 5.Switch for income The scariest part of retirement is the lack of a monthly income to pay for monthly expenses. You can get a regular income by activating the Systematic Withdrawal Plan (SWP) feature on an existing investment. You can opt for payout options as per your requirements.
Your portfolio should primarily focus on minimizing risk with only a small portion focused on growth.
Follow these 5 investment tips and you may be able to generate returns while minimizing risk and deal with any type of contingency.
An Investor education and Awareness initiative of Aditya Birla Sun Life Mutual Fund.
All investors have to go through a one-time KYC (Know Your Customer) process. Investors to invest only with SEBI registered Mutual Funds. For further information on KYC, list of SEBI registered Mutual Funds and redressal of complaints including details about SEBI SCORES portal, visit link https://mutualfund.adityabirlacapital.com/investor-education/education/kyc-and-redressal for further details.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.