When it comes to dealing with the financial implications of life, such as starting a family or buying a house, your priorities don’t tend to extend much further than the short-term. But, before you know it, you will reach retirement age and not have a nest egg to fall back on.
Although the earlier you start saving the more you will get in return, it is never too late to build an investment portfolio. But, what should you be doing with your money and how can you make the most out of your investment choices? Here is everything you need to know with help from financial professionals IG Dubai.
Understanding risk
Regardless of whether you are middle-aged or approaching retirement, you need to understand the relationship between the length of your investment and the degree of risk you will be able to take. For instance, if you can still work for several years to come, you can afford to make riskier investments.
However, even middle-aged investors need to be somewhat conservative, as wealth preservation is of the utmost importance later in life. Therefore, look towards bonds and government-backed securities, as these investment choices can provide you with a great deal of safety and liquidity.
Portfolio diversification
Even if you are able to take a few risks with your investment choices, it makes perfect sense to spread your money across a mixture of stocks, bonds, investment funds, and cash deposits. With portfolio diversification, the poor performance of one asset won’t matter as much thanks to the strong performance of another.
Even so, when it gets to the point in which you want to access your money, think about moving any risky funds into safer investments. In order to truly succeed at investing later in life, you will need to adopt quite a proactive approach.
Investment choices
Any investment strategy later in life should include contributions to a pension plan. However, the rest of your choices will depend on the sort of income you want during retirement. To give an example, it is recommended to phase out volatility from your pension fund to mitigate risk if you want to purchase an annuity when you retire.
If you are unsure about the investment choices you should be making, speak to a financial adviser or brokerage firm about your options. But remember, most professionals will charge a percentage fee per annum for managing your investment portfolio.
Investment timescale
Despite the fact it might be too late to seek out long-term stock market opportunities, there is every possibility of achieving impressive returns from a period of five to ten years. To illustrate, the S&P 500 health-care sector has climbed a whopping 162 per cent since June 2010.
But that doesn’t mean to say you will be able to ‘get rich quick’ with investing in later life. Even if you have got more disposable income due to the diminished responsibility of childcare and mortgage repayments, you will need to put financial security at the top of your wish list and be prepared to display a degree of patience.
