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Prepare Your Retirement Funds

February 16, 2012 | Comments: 0 | Views: 151

After working hard for decades to make money, someone who enters the retirement period will want to enjoy life in peace. Surely you would be happy if you can still be financially independent. Therefore, thinking and preparing for your retirement funds is essential.

The sooner you allocate your money for retirement funds, the amount of monthly installment payment would be smaller. But the collected funds are potentially bigger. You are also having the bigger opportunity to gain the compounding return (accumulated profits). So you should start planning to collect your retirement funds as soon as you work and earn income.

It is better for you to not only rely on the pension funds managed by the agency or company where you work for. It is because usually this pension funds agency only places the funds on a conservative investment instruments with low return.

Select the more aggressive investment product

In fact, preparing the retirement funds may need up to decades time of investment. A small return of investment probably will not cover the inflation. Therefore, you suggested to allocate yourself a retirement funds to the investment product with bigger potential return. On the other hand, do not need to worry about the investment risk because the long-range of investment can minimize the risk.

The amount of money to set aside for establishes this retirement fund is relative. There are many factors that affect, such as current salary, income expectations and future lifestyle at retirement, your investment character, and how much time you need to prepare this retirement funds.

Well, here are some investment tool you could use to establish and preparing your retirement funds.

Stock or equity mutual fund

There are at least two advantages to be gained from investing in stock mutual fund, the potential return of the stock price and ease of investing.

The potential return is large enough, can be up to 30% per year. But, there is risk of your investment may go down because of price fluctuations of stock in your portfolios.

Stock investment

Besides enjoying the rise in stock prices, investors can enjoy the company's net profits or dividends. However, it takes careful analysis to not select the wrong stocks. You can select stocks with good fundamental performance, such as large company stocks or blue chips.

However, blue chip stock prices, generally, expensive. So, you could buy the second-tier stocks that have the potential to have good long-term growth.

Bond

Bond with the long-term period over 15 years can also be an option. Just like stocks, you should keep this for long-term, even to its maturity.

You can gain a benefit of the coupons interest or price increases. To reduce risks, financial planners recommend that you choose the government bonds more than corporate bonds.

Property investment

Property can be a source of retirement funds. However, selling the property is the final choice. Except the price is not cheap, selling the property is not easy. So, it is better to rent out your property to get passive income.

The selection of the type and location of the property becomes a crucial factor because it determines the rate of price increases and rental demand.

Well, let us prepare or our old age period. Let us prepare the retirement funds! Make a better personal financial planning!

* Analyze your Personal Financial Planning before choosing an investment type.

Source: EzineArticles
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