One common rule of thumb for investors is to move away from stocks into more conservative investments as you get older. The thinking behind this is that stocks always carry the risk of losing value, and that’s not something you want to see with your retirement fund.
But completely abandoning stocks may not be the right strategy, either. Holding some stocks in your portfolio can be a hedge against inflation, and can help ensure that your retirement money lasts as long as you do, but you can still indulge in some games from www.newzealandcasinos.io to get some extra cash.
Here’s a look at some reasons why, even for older investors, stocks are always a good buy.
You may live longer than you think
Many people assume that once you approach retirement age, all of your efforts should be focused on protecting your assets rather than growing them. But the reality is that many retirees will need their money to last 30 years or more, and the only way to make money last that long is to continue to accumulate it.
Having some money in stocks will, in most years, allow you to replenish the money that you spend from your portfolio. Consider this: If you have a nest egg of $1 million and spend $50,000 annually, your savings will be gone in about 20 years. But if you are able to add 4 per cent to your portfolio each year from stocks, your savings could last another decade or more.
Many stocks can be safe investments
We tend to think of stocks as risky and volatile investments, but that’s not always the case. Many stocks are actually very common and useful investments for people looking to bring stability to their portfolios, like their accounts with real money pokies.
Dividend stocks are a common component of retiree accounts because they generate income for the investor and generally don’t rise and fall dramatically in price. There are also some industries, such as consumer goods, that have offered steady returns year in and year out. Some stocks, such as Wal-Mart, are good bets even during bad economic times. You don’t have to lay off stocks entirely as you get close to retirement age. It’s just a matter of finding stable, income-producing stocks that can serve you well as you get older.
Markets rebound fairly quickly
No one likes to see the stock market take a big dive, but the good news is that it always goes back up. There are only a handful of times in history when the stock market has had consecutive down years. Moreover, years with negative returns are often followed up with positive returns of greater magnitude. History shows that if you lose money in the markets one year, you’ll likely make that money and more back within a few years. In other words, even if you are well into your senior years, you’re unlikely to see your entire savings gone in a single swoop.
Stocks don’t need to comprise your whole portfolio
Buying stocks when you are at or near retirement age is only a bad idea if you’re not also invested in more stable things like bonds and cash. Stocks don’t have to make up 100 per cent of your retirement fund. They don’t even have to make up 50 or 25 per cent. But having stocks as a relatively small percentage of your portfolio can help make your money last longer without adding much risk.
Returns from bonds and cash are lousy these days
For many years, it was common for Americans to get good returns on government and municipal bonds, as well as normal savings accounts and certificates of deposit. Thus, retirement accounts were constantly being replenished with new money.
Nowadays, interest rates are still at some of their lowest rates in history, so it’s easy to see how your personal spending rate will outpace the returns from your retirement funds. In fact, there is some risk that your returns may not even outpace the rate of inflation. Only with stocks will you be able to see the types of gains once seen from bonds and cash in the past, and you’ll never be at risk of seeing inflation eat away at your nest egg.