The three biggest factors in determining the viability of your retirement plan are (1) the age in which you retire, (2) the amount you have accumulated, and (3) the pace at which you want to spend it.
When it comes to your retirement investing, however, no other factor will have a greater impact upon your portfolio's success or failure than your asset allocation decisions. The mix of stocks, bonds, cash, international and alternative investments has been shown to account for 90% of the cause of portfolio returns in a Nobel Prize winning study by Dr. Harold Markowitz. Be too meek and you run the risk of shortfall; be too aggressive and you run the risk of suffering a larger loss than you can afford to experience (also leading to shortfall).
There is no "one-size-fits-all" asset allocation strategy for all retirees, as asset allocation strategies are built on the big three factors mentioned previously, and no two persons are the same.
As you evaluate potential asset allocation strategies, keep in mind the following pitfalls in order to better steer your portfolio in the right direction:
- Being too Conservative
- Failing to Understand Risk Capacity
- Ignoring your Emotional Track Record
- Separating your Investments and your Income Sources
- Overlooking Non-Retirement Goals
- Neglecting to keep your Asset Allocation Current
In the following weeks we will be discussing the aforementioned pitfalls in more detail, to get the next post sent directly to your inbox, sign up here!
Investments in securities fo not offer a fix rate of return. Principal, yield and/or share price will fluctate with changes in the market conditions and, when sold or redeemed, you may receive more or less than origincally inveted. No system or financial planning strategy cna guarentee future results.