How do you know what investments
The precise make-up of a person’s investment portfolio will vary depending on the individual’s age. In early life, the ratio of risky-to-safe investments will tend to be higher than it is when he or she reaches middle age. In the final few years, before retirement, investments should be concentrated solely on reliable, low risk products aimed at providing a long-term income.
The market is in a constant state of flux and recent government legislation allowing anyone over 55 to take their entire private pension as a lump sum - effective from April 2015 - will make a huge difference as to how they invest for the future. With this in mind, it makes more sense than ever to discuss with an investment manager how best to go about assembling a portfolio that maximises the monthly income available, based on the size of the individual’s savings pot and the lifestyle he or she intends to enjoy in the coming years.
It is worth bearing in mind that as the average life expectancy for men living in the UK is now 79.5 and 82.5 for women, it is sensible to put together a plan designed to support individuals financially for a period of between 20 and 30 years. Account should also be taken of the fact that retirees are likely to be more active and independent over the first decade or so, after which, depending on their state of health, they may want to consider moving into a retirement community with onsite medical facilities. If there are children or grandchildren to think about, it may also be worth considering options that will benefit them.
Finding a reliable and reputable investment management firm has been made easier than ever thanks to the internet; however, there are so many companies plying their wares that making the right choice can seem overwhelming. One of the easiest ways to ascertain how suitable a company might be is to view images of its management team, premises, and the latest blogs and graphics demonstrating the various types of data it uses. An excellent example of this is provided by Fisher Investments on its Fisher Investments Flickr page.
Though it is no longer compulsory to purchase an annuity on retirement, enhanced or impaired annuities are still worth considering for those suffering from a recognised medical condition. These include kidney failure, heart disease, cancer, smoking, high blood pressure and diabetes. The thinking behind this form of annuity is that because the subject is not expected to have the life expectancy of a healthy adult they will use up the pension in a shorter period of time, making it possible for them to receive a higher income, sometimes by as much as 50% more than normal. To qualify for an enhanced annuity the individual must complete a health and lifestyle questionnaire and may be asked to undergo a medical examination.
Last year, Warren Buffet, suggested a plan designed to simplify the entire process of assembling a portfolio that was both safe and efficient. Basically, his scheme consists of putting 90 per cent of the available funds into a FTSE 100 index tracker and the remaining 10 per cent, which acts as a buffer, in short-term government bonds. There are similar products to track funds on the market, for example, unit trusts and investment trusts. Short term government bonds, also known as ‘gilts’ are repaid over six months and offer quite low rates of return, but benefit from being the safest asset available. Another alternative, which carries slightly more risk are short-term bonds. Finally, the buffer could be held in the form of cash in an instant access savings account.
Over the long term, property has always been one of the safest forms of investment. However, since the onset of the recession in 2008, average house prices across the UK have remained virtually static, London being the exception. Today, a recovery is starting to get underway, making this the perfect time to purchase one or more properties to rent out. Online property portal, Rightmove is forecasting that prices will increase by up to 30 per cent over the next five years, which by itself is a great rate of return. Until they decide to sell, property investors receive a monthly income from tenants, which should generate a reasonably healthy income. It should be borne in mind that not everyone is cut out to be a landlord, in which case it would be worth employing a management company to handle day-to-day issues with tenants.
Retirement should be a period of relaxation, a time to travel, perhaps relocate abroad or to another part of the country, make new friends and above all wave goodbye to financial worries. By working with an experienced investment manager, anyone, no matter how much they have saved, can be sure of maximising and securing their retirement income for many years to come.
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