We have all heard of the adage – “Do not put all your eggs in one basket.” The same holds true in the world of investing. In traditional investment theory, this means holding a range of different products in your retirement portfolio. Too many investors lose their risk appetite as they age. But some opting for growth products is essential for retirees as well.
Beat inflation
Many investors rely on bank deposits for retirement income. They compare tax saving Fixed Deposits, and then try to choose the best annuity plans. Some think of term insurance premium calculators for retirement. But you should also take into account the impact of inflation on your expenses. The product will fall short if the income does not keep pace with inflation. And to earn inflation-adjusted returns, you should be willing to take some risk, by allocating some portion of the investments in inflation beating products. Considering the increase in life span, the retired life can be around 30 years, if a person retires at 60.
Mix and Match
The advisable approach should be to protect your needs for the first 4 to 5 years of retirement in safe investments, so that short-term market fluctuations do not impact you. Beyond that, you should have some part of the funds invested in growth or equity assets.
Some products bring assured income for life, but given the low returns, they should be used only to the extent required to meet necessary expenses such as health and insurance.
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