Marta V. Plampin
As a financial advisor, I know that planning for retirement is a top priority for my clients. The economic slump of the past 24 months has many people worrying about their retirement savings. Many investors are learning the hard way about the need for diversification in their investment portfolios. Although there is no magic formula for weathering the ups and downs of the market, there are a few time-honored strategies that, if used with discipline, will increase your chances of maintaining a positive return over the long haul.
Keep a Long-Term Perspective
The most important step you can take is to stay invested. For long-term goals, such as saving for retirement, avoid making any snap decisions and understand that day-to-day, and even year-to-year, market fluctuations are normal and must be tolerated.
Know Your Risk Tolerance
Know your tolerance for investment risk and do not push beyond it. Think about the kind of person you are – are you a thrill seeker who lives moment to moment or a creature of habit who doesn’t like surprises? Most people fall somewhere in the middle of this continuum. A financial advisor can help you translate your comfort with risk into an investment portfolio that complements it.
Diversify Your Portfolio
Diversification involves looking at your overall „asset allocation,” or how much of your money is allocated to different types of investments. It is important to have a balanced portfolio across all asset classes, such as equities, fixed-rate investments, and money markets because each class reacts differently to economic conditions.
Be receptive to learning about products that you may not have considered before. For example, consider adding a fixed annuity to your portfolio. Fixed annuities are financial contracts with an insurance company and are meant to be a source of retirement income. During bear markets, they tend to become increasingly popular for investors who are looking for safety, an attractive rate of return and specific protection features. But you shouldn’t wait for market downturns before you consider a product such as a fixed annuity. Even in a bull market, fixed annuities can add long-term stability to your portfolio
Because fixed annuities are issued by an insurance company, they offer insurance features, such as guaranteed rates of return, guaranteed principal and guaranteed retirement income. In fact, you can choose to receive income from your fixed annuity, through scheduled distributions for the rest of your life. Of course, these guarantees are subject to the continued claims paying ability of the insurance company, but overall, fixed annuities can provide a secure source of income that won’t be subject to the ongoing ups and downs of the market.
As always, it’s a good idea to work with a qualified financial advisor who can help ensure that your investment portfolio includes a product mix that reflects your goals and tolerance for risk.
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Marta V. Plampin
Personal Financial Advisor
American Express Financial Advisors Inc.
American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. (0108/081302a)