6 Ways to Add Muscle to an Out-Of-Shape Retirement Plan

November 1, 2016

The need for income for the long run, the exhausting effect of inflation, the worry of potential medical or long-term care, and retirement costs may now haunt you. You know you must catch up and get your portfolio, not just in shape, but pumped full of more money.

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There is nothing worse than being retired and financially weak or broke. You want the marathon run-to-win solutions. Here are a few suggestions using a physical workout as a metaphor:

  1. Start good habits—become an investor enthusiast. Like going to the gym, you must at least enter the gym and begin one exercise. Then the workout gets progressively easier. Begin to enjoy purchasing mutual funds and building a portfolio. Like saying YES to your exercise habits, it will become easier to say a big YES to disciplined investing.
  2. Get fit—build a strong long-term mutual fund portfolio. You may need the possibility for higher returns over the long term, so focusing on a higher percentage of your portfolio in equity funds may make sense once you determine your risk tolerance. When the market moves into a bull market, stocks can flourish and increase in value and help you get caught up. Add other funds into the mix to diversify and reduce risk.
  3. Exercise all your muscles—develop a diversified portfolio. You need to work all your muscle groups for maximal strength. Similarly, diversify your mutual fund investments among growth equity, large-cap, small-cap, foreign equity, and bond funds. Don’t make the mistake of focusing on just a few sectors to the exclusion of others; include growth stocks and value stocks, domestic and international securities—the ups and downs of the various sectors can tend to even out to make the overall portfolio less volatile.
  4. Work more than just your biceps—review to keep balance in your portfolio. Aim to keep your habit of investing running for the long term. When working out it is important to not get too focused on one muscle group while neglecting others—go for a total workout. Consider aerobics. Establish the percentage of your portfolio invested in each of the various sectors. Since these sectors will perform differently over time, you need to re-balance these investments periodically to restore the desired ratios.
  5. Review your progress to stay in shape—-re-balance to maintain portfolio strength. At prescribed intervals—once every several months—review your allocation goals and adjust these mutual fund investment holdings periodically to restore the desired ratios.
  6. Adjust your workout according to your age—rebalance for retirement timelines. Adjust your percentages according to how soon you will retire. For example: If you still have 20 years or more, the majority of your money could go into equity funds (if you are risk tolerant). Investors with 10 to 15 years may want to own about fifty percent equities. If you just have say 5 years remaining to invest, you may desire to move into a higher weighting of bond and money market funds. Even in retirement, equities can remain an important component to help portfolios catch up and gain in rising bull markets.
  7. Hire a trainer—a credentialed advisor can help guide your investing. An advisor can help you select good mutual funds while diversifying your portfolio along with fund managers with good track records. He or she can also guide you with regard to your retirement goals within the time you have left to invest.

Please contact me to set up a meeting to discuss maximizing your retirement portfolio’s potential.

 

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