If you are planning to retire soon and planning to manage your own retirement account, don’t go it alone. Get help with your retirement investing. Take an active part in all decisions. Most of us do not know very much about the details of the investments we have. We participate in a mutual fund which has a combination of stocks, bonds and cash. We leave it up to our financial adviser to recommend something to us.
Then we rely on the mutual fund manager to manage the fund for us. It is a good idea to get advice from people who make it their business to understand the markets, the investment opportunities etc,. Someone has to pay them and that means you. Each time you buy a mutual fund, your adviser gets a kickback. The mutual fund manager charges up to 2% MER fees in Canada and somewhat less in the US. You make money only after they get paid. In a down year that can mean that your account actually loses money.
Retirement Investing – Invest Directly in Equities and bonds
One way to avoid all of these fees, which are ongoing each year is to purchase equities and corporate bonds directly within your investment plan. You will pay a trading fee initially, but that is the only fee you will pay until you sell the equity. The next thing to focus on is which stocks and which bonds. Use your adviser, do your own research and stay away from speculative and high risk stocks.
In our opinion, consumers investing for retirement should focus on blue chip companies that have a long history of paying dividends and meeting the terms of their bonds. Better still is that these companies pay a dividend on a regular basis they also routinely increase the total dividend from time to time. The same applies to corporate bonds, although in their case the interest paid is usually fixed for the life of the bond. If it is a good quality company, then your risk will be relatively low. We should mention that nothing is risk free and that is why you want to invest in a diverse group of companies so that if anything catastrophic occurs, then your total nest egg is not in jeopardy.
Seek guidance and advice from several people and them make your own decisions regarding the best approach to take with your Retirement Investing! If you worry about your investments and it keeps you awake at night, invest even more conservatively. You may sacrifice some income for less risk, but you will sleep at night.