Retirees and soon-to-be retirees should be made aware of the risks associated with investing in the stock market and the risks of not. The big question is; is it smart to keep your money in the stock market after you retire?
Traditional thinking is centered on the belief that as one gets older, equity allocation should decrease and bond allocation should increase. DLG Wealth Management manages volatility risk, but also manages “inflation,” risk.Read these facts below to get a solid grasp on being in stocks or bonds as you get closer to retirement or are in retirement:
• In stocks, the risk is volatility. But with retirees, inflation is a major, major risk. Inflation can be more risk than volatility because we’re living longer and we need to have a portfolio that keeps up with inflation - or else ten years from now, we can’t afford what we have to live on.
• 1/3 of the time, bonds have kept up with the rate of inflation, which means 2/3 of the time they have not. Bonds are not a great investment when you need to worry about inflation.
• DLG’s advisors work with their clients to create a portfolio that meets their goals and financial objectives with consideration to risk tolerance. DLG advisors are not locked in to cookie cutter stock and bond allocations.
• Lately, interest rates have been artificially put down creating a “bond bubble”. This means that there are three times as much money in bonds than there are in stocks when it comes to mutual funds. However, when interest rates go up, the value of bonds go down and the interest rates are going to go up soon, we just don’t know when. When this happens, it can create some big volatility risk in your portfolio.
For all the retirees or soon-to-be retirees, take a look at your portfolio. Will you have enough to get you through retirement to live comfortable? Make sure you are well diversified. Bonds & stocks fluctuate in value. Which one will keep up with inflation?