The 3 “Golden” rules to build your dream retirement fund

We all know that it is very essential to build a good retirement corpus with the help of a good retirement plan. However, people either fail in making a good plan or they are not sure how to make a good investment for their retirement. This is the reason most people find it intimidating to build their retirement corpus. But, whether we like it or not, the means to have a comfortable and peaceful retirement is up to us. Your retirement lifestyle depends on what you do today and tomorrow.

Here are the 3 simple yet “golden” rules that will help you build that dream retirement fund.

  1. Your age will decide on how you invest: Your age will be the deciding factor on what all you can invest in to build your retirement corpus. The younger you start saving and investing for your retirement, the greater options you will have such as stocks, mutual funds, bonds, real estate and so on. The closer you are to your retirement, say in the late 50s then it is wise to stick to the safest options such as debt funds and bonds and fixed deposits. You can also follow this simple rule to invest in stocks and mutual funds.

100 – your age = percentage to invest in stocks and/ mutual funds.

  1. Understand your risk tolerance capacity: Investing in stocks and mutual funds will definitely give you the best chance to grow your money. However, it has a higher percentage of risk involved. But if you pool in all of your money in investments with lower risk, you will obviously earn nothing. The amount you have saved/ accumulated will even be lost to inflation. This leaves you with a question of whether to take high risk and gain more returns or choose low-risk options and gain nothing. Thus, understanding your risk tolerance capacity will help you decide on what to invest and when to invest.
  2. Diversify your investments: It is always a good practice to divide your money among different savings and investment options to reduce your risk factor. This is called diversification. By choosing the right set of investment sectors and also by carefully calculating and dividing your money under these different sectors, you will not only be able to limit your losses but will also be able to handle any fluctuations in returns from your investments without sacrificing a lot of potential gains. A cautiously selected diverse set of investments will help you protect against losses from high-risk investments and also help you build a good retirement corpus that will beat inflation.

 


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About the Author: Anant G Bhatavadeka

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