How Should Those Nearing Retirement Invest Into The Stock Market
Stock investing is unpredictable and thus you will always hear people telling that the stock market is only for the young who are ready to take on risks. The old should stay away from the stock market.
The truth, however, is a little different. Yes, the stock market is volatile and risky but it young or old, the stock market investment is the only way form of investment that can let your money beat inflation in the long run. This is why everyone should have a portion of their savings in the stock market.
The cash that you have in your savings account or in your fixed deposits, is something that you need as an emergency fund. But if you have along term horizon then you should consider buying stocks. If the target to reach your fund is distant then the stock market is the best option because it helps to beat inflation.
If however you are retired or close to retirement then you should consider investing in equities by being careful on the proportion that you invest into equities. An emergency fund should be set aside in bank fixed deposits or into some short-term funds. The remaining can be invested into equities.
Which stocks should someone near retirement invest into?
Someone who is close to his retirement would have less risk taking appetite and also less time to see his funds perform. This is why one should carefully choose to invest only in companies that are growing consistently and also companies that are run by a good management team in this trading software. It is best to stick only to the blue-chip companies. There are many sectors like information technology or FMCG that do not get impacted a lot by the market trends and thus these are good investment options. Also one can consider companies that have a history of good dividend payments.
Large-cap stocks and the blue-chip companies tend to be less volatile and also pay regular dividends. These outperform the market in most cases. Defensive stocks should be a part of the portfolio for someone who is nearing retirement.
Factors that you should be aware of
The young can bet their money on new companies and those companies that are emerging. This is because they have a lot of time to see their investment grow. The retired should look to invest in companies that are established and have good governance.
The companies that have performed in the past and have a substantial amount of market share will need lesser funds to expand their business and they can thus distribute the gains as dividends. This is a benefit for those nearing retirement.