It’s common sense – save money so you can have financial security. Saving money is a wonderful habit, but the returns on your savings are significantly lower than if you invest that money instead.
As people plan for retirement, their approach toward investments tends to become more conservative. After all, no one wants to risk losing their nest egg.
Unfortunately, investing in any kind of market involves some degree of risk. Usually, the higher the risk, the better the reward. That, however, does not mean that you should cash out your 401(k) and invest in risky ventures.
All it means is that you should consider any kind of investment you want to make and take calculated risks. You should also have a contingency plan if your investment doesn’t work out the way you want it to.
The #1 Investment Tip for Retirees in 2019
According to a report by CNBC, retirees can blow through $1 million in about twelve years. Most Americans retire at the age of 65 and have the average life expectancy is 85. With rising medical costs and longer lifespans, retirees need more money.
Do you have that much in your 401(k), IRA or any other retirement savings plan? Not very many people do. Reports from Fidelity show that only 157,000 people who hold a 401(k) have that much in their accounts to date.
So what can you do to increase the size of your nest egg as you face retirement? There is an array of investment tips that you could consider for the coming 2019 fiscal year. Here are a few that could help boost that retirement fund a little more:
1. Scale Back on Your Bond Holdings
Bonds have been a mainstay for many investors. They are stable and low-risk. The problem with bonds is that they also come with low yields. They also fluctuate from time to time, such as when interest rates go up. These rate hikes negatively affect bond performance.
Decreased bond values have been projected for 2019. We are potentially looking at three interest rate hikes in 2019. This will significantly affect any bond holdings that you have. This will have an overall negative effect on your portfolio. As we approach the new year, you may want to consider scaling back bond holdings. There are other investments you can venture into instead.
2. You Might Want to Look into Commodities
Commodities such as silver and gold have always been stable investments. In the coming year, there is a good chance that the value of these commodities may increase for two reasons:
- The dollar will trend lower: most world economies will slow down. This will cause the dollar to trend lower. This is good news for stable commodities like silver, gold, and other precious medals.
- Commodities are highly shorted: as an asset group, people like shorting commodities. This is exactly what is happening across the globe right now. The good thing is that these markets tend to go up quickly so it is likely to rise in the coming year.
These two arguments make a compelling case for holding commodities. Diversifying your investment portfolio with could give you some wiggle room if the markets creep upward.
3. Re-balance Your Portfolio
Another wonderful tip is to rebalance your portfolio. This means paying a little less attention to risk and becoming a bit more adventurous. The old investment adage of “sell high and buy low” should guide you in this process.
The market is currently coming to the end of a 10-year recovery. This means that people may want to consider investing in the following:
- Emerging markets
- International Equities
- Small Cap Value
- Fixed Income
It’s also a good idea to keep a good amount in your cash reserves because another recession may be around the corner. Doing so keeps you from having to sell everything when the market is down.
4. Be Careful with Your Taxes
Most people never really think about how taxes will affect their investments. They only think about how much money they will make. The truth is that taxes can affect how much you actually gain. You need to think of ways to manage your taxes – especially once you get to the age where the government forces you to take RMDs (Required Minimum Distributions). These are added to your income and may push you into another tax bracket. This means that you will end up paying more.
Since most markets have done well, many people see healthy returns on their portfolios. As such, they should start thinking about taxes. We are also talking about accounts like 401(k) and ROTH accounts that are often taxed differently.
As we already mentioned, there isn’t a single tip on how to invest your money in 2019. There are many other things you can do. There assortment of tips can help you get the kind of returns you need and see a profit. If you’re not sure what how to invest for 2019, it’s a good idea to seek out a qualified financial adviser who can help you.