Many experts recommend investing in income-generating assets such as money market accounts, Treasury bills, or pensions. These types of investments provide a monthly income that can help supplement your other income streams in retirement.. And since they tend to be more stable than stocks and other volatile investments, they can help you maintain your lifestyle even when the stock market falls.. The asset allocation changes broadly depending on age.
If you’re in your 50s, you’ll likely need a structured portfolio that invests 50-60% in stocks, 35% in bonds and the rest in cash. When you reach your 70s, it is often recommended that you invest around 70-80% of your asset allocation in bonds and invest the rest in stocks while keeping a small cash balance. Being 70 gives you some clues as to what your asset allocation should look like — provided that you are going to retire soon or have already done so.. In this phase of life, many fund managers would favour an investment portfolio with an asset allocation that is heavily weighted towards bonds..
Bonds are a less risky asset than investments in stocks and stocks. In addition, they can still provide some monetary growth. It is therefore not unusual for a 70-year-old’s portfolio to invest up to 80% of its investments in fixed-income products such as bonds.. The rest will consist of stocks, alternative assets, and cash equivalents.
As mentioned earlier, many fund managers would recommend having a portfolio in your 70s that is heavily invested in bonds.. Bonds are a good asset class if you’re in your 70s because they help save capital while earning interest.. However, there are different types of bonds that may or may not be appropriate for your specific circumstances.. Different types of bonds vary in the amount of risk they carry..
Government bonds are widely regarded as the safest type of bond and therefore have a low interest rate. As a result, you won’t earn much income by holding these types of bonds.. You must ensure that they at least exceed inflation so that your capital does not lose purchasing power.. At the other end of the scale are junk bonds..
These bonds offer a higher yield than others to compensate bondholders for the added risk of holding them.. The risk is that the bond issuer goes bankrupt and cannot repay the investment amount, let alone the interest. Somewhere in the middle are corporate bonds, which are probably very suitable for investors in their 70s.. The reason is that you get a cheap interest rate while reducing the risk of losing capital..
Many huge companies issue bonds regularly. If you do thorough due diligence, you should be able to find companies that are highly unlikely to go bankrupt and therefore be able to repay your initial investment.. An excellent starting point is to look at the rating that rating agencies assign to a bond and work from there.. Ratings offer a quick and easy way to determine how creditworthy a company issuing a bond is.
If your risk profile allows it, you may find that investing in stocks that pay a regular dividend payment is an appropriate investment.. Dividend paying stocks work like a bond in some ways and can help you preserve capital and generate income.. You can even benefit from capital growth if the share price rises.. Here too, as with investments in corporate bonds, you can find out with thorough research that the risk that the price of your share will fall massively is low..
Also, when looking for dividend-paying stocks, make sure that the probability that the dividend will be cut or even stopped is minimal. To do this, you must be certain that the market conditions are right so that a company will continue to pay out at the rate they offer.. In addition, you must also be happy that your business model remains profitable enough to secure dividend payments.. Investing in a multi-asset fund is somewhere between choosing stocks, buying specific bonds and investing in equity funds.
For many novice investors over the age of 70, it may be comforting to invest in this type of investment.. The fund will invest in a specific proportion of stocks compared to bonds. The structure of each multi-asset fund is set out in its investment objective and prospectus.. If a multi-asset fund sounds appealing to you, try to identify funds that invest in stocks, bonds, and any other asset class you’re happy with..
Many multi-asset funds can even be income funds, so you earn income while trying to conserve your capital.. Finally, don’t forget that you’ve worked hard for most of your life. It could be that you want to enjoy the fruits of that work, and one way to do that is to invest in wine.. That way, you can either drink it and enjoy it that way, or try to get into fine wines, which can be a good investment..
For seniors, preferred stocks are often a better choice than common stocks. This is because preferred stocks pay a much higher dividend than common stocks and because this dividend is more important in a company’s capital structure.. This means that if a company runs into financial difficulties, it must pay out its preferred shareholders before common shareholders receive anything.. The old rule of thumb used to be that you should subtract your age from 100 — and that’s the percentage of your portfolio that you should hold in stocks.
For example, if you’re 30 years old, you should hold 70% of your portfolio in stocks. If you’re 70 years old, you should hold 30% of your portfolio in stocks.