Investing in stock market during youth is thoroughly different than investing during retirement age. The risk appetite of an investor never stays the same throughout his lifetime. People thus become concern as to how many stocks should an investor hold when he is nearing his retirement. Most financial advisors recommend investors to have an investment portfolio that is not subject to high loss. In this context mostly a portfolio consisting of a combination of bonds and stocks can be beneficial.
When stock market investment involves investing in both stocks and bonds the riddle is to find the perfect ratio between stock and bond volume in a portfolio. This is often a riddle for retired people and they usually refrain from investing any more. However, there is a thumb rule that can help an investor to decide upon this issue within no time. The rule pronounces an investor to subtract his or her age from 100 and then the subtracted figure will be the percentage of stocks in his or her portfolio.
The logic behind this rule thumb is to lessen the exposure of stocks in a portfolio. The company stocks in the stock market are characterized by its volatility. As the age for earning finishes risk aversion grows and thus lessening stocks can put an investor in a better off place.
Although much of the investment portfolio can stay out of the exposure of the ebb and surge of stock market, yet concern rises when inflation occurs. The bonds, which by the thumb rule, now comprises lion share of the investment portfolio are subject to the risk of inflation. The income generated by bonds shrinks as inflation grows and thus generates the need to develop a secondary strategy.
The secondary strategy for investment in stock market thus explains the need to have stocks in your portfolio more than the thumb rule shows. Stock prices keep pace with the growing level of inflation. Thus, in an economy where inflation has high chances of growing in every 2 years, having a little bit more stocks can put a retired person in a prosperous position.
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Angel Broking is one of the best stock broking and wealth management companies in India. Angel Broking offers various products and services to Indian investors including online stock trading, mutual funds, derivatives trading, commodity trading, IPO, PMS and investment advisory services.
Article from articlesbase.com
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