Retirement planning is about understanding your retirement goals and the retirement strategies needed to get you there. Conventional retirement wisdom suggests that individuals should hold a well-diversified portfolio of stocks, bonds, and cash that grows proportionally as one ages.
The old adage for allocating funds between stocks and bonds holds that you should keep a percentage of stocks equal to 100 minus your age. If you are 35, a conventional financial planner would tell you to put 65% in stocks and 35% in bonds. If you are 60, they would tell you to put 40% in stocks and 60% in bonds. Or looked at another way, the allocated bond percentage is equal to your age…the remainder is in stocks.
Younger investors have the luxury of time on their side and can afford to have a larger percentage of their investments in high-risk/high-yield equities. The older you get, the better it is to have an increasingly large percentage of your retirement income in low-risk/low-yield investments.
That said, high-yield investments are not for everyone. Keep in mind, when you are looking for high-yield investments, such as penny stocks, your risk will be much more significant than with conservative investments, such as government bonds. But then again, a basic rule of investing is that high risk translates into high reward.
Where can investors looking to build their retirement nest egg turn to increase their income and decrease risk?
Whether you’re high risk or risk-averse, one of the most common investment strategies is to focus on income-generating investments. This is easy to manage, as investors spend only the income (dividend yields, interest) that a portfolio generates.
If you want to generate additional income from your investment strategies, you may want to streamline your portfolio and increase the bond allocation to higher yield bonds, or change your stocks to higher-dividend equities.
Regardless of age and where you’re at with your retirement savings, there are investment strategies to suite your risk level and long-term needs. Some investors prefer to maximize expected returns by investing in risky assets, others prefer to minimize risk, but most look for a strategy somewhere in between.
That’s why it’s important to look for investment strategies that allow you to take advantage of long-term growth on the stock market; while hedging against downturns with high-yield bonds and equity funds.
The move by Burger King Worldwide, Inc. (BKW) to acquire Canada-based Tim Hortons Inc. (NYSE/THI) was a genius move and buying opportunity that surprised many in the stock market. Just look at the reaction of the traders after the news surfaced that Burger King was indeed buying Tim Hortons; Burger King stock surged on the news, which I also believe was a very strategic move by the company and a possible buying opportunity for investors. The initial speculation was valid as an $11.0-billion deal was announced. Tim Hortons stock closed up more than 31% after the announcement and the initial buying opportunity. For the acquisition, Warren Buffe ... Read More
The stock market appears anxious to move higher to new record highs. In the past week, the Federal Reserve released its Federal Open Market Committee (FOMC) meeting minutes that suggested it wanted to see stronger, sustained growth before deciding on when to raise interest rates. This includes both economic growth and jobs creation. On Thursday, the Bureau of Economic Analysis (BEA) will report the second reading of the second-quarter gross domestic product (GDP), which came in at a surprising ... Read More
It began with the battle for Crimea, followed by the shooting down of Malaysian flight ML17 in eastern Ukraine, but for Russia, which was blamed for both, there has been a battle over the strength of its economy, triggered by a multitude of economic sanctions by Europe and the United States. Russia, under President Vladimir Putin, has been in strong denial to all the blame it has received; but clearly, the world sees a different story, which is the reason for the economic sanctions. Now, these economic sanctions have begun to wreak havoc in the region, based on my Read More
It was just a few months ago that the technology sector stocks, specifically the momentum stocks, were getting bashed around and sold off by the stock market. Since then, the selling has subsided and we have seen a nice rebound in technology stocks to the point where the NASDAQ is the top gainer in the stock market with a 6.88% advance as of Monday. By contrast, blue chips are hurting, with the Dow Jones Industrial Average down 0.55%. What the stock market is suggesting to us is that the appetite for risk and higher-beta stocks continues to be prevalent as investors seek the po ... Read More
Alternative energy plays have been around for decades, including Ballard Power Systems Inc. (NASDAQ/BLDP), a maker of hydrogen fuel cells that went public in 1993. The stock traded as high as $100.00 as a speculative investment opportunity in early 2000 but was unable to break into the automotive market. It is currently drifting at the $4.00 level. However, what Ballard was hoping for is now materializing for battery-powered automaker Tesla Motors, Inc. (NASDAQ/TSLA), which has built a superhighway of charging stations across the U.S. and is expanding into Europe and China. ... Read More
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One of the most common traits I find in successful companies is that they often have a multinational presence. That’s not to say that domestic-only companies are not successful, but for real growth, many of the top S&P 500 companies are global, based on my stock analysis. Whether it’s in the industrial, technology, financial, aerospace, or healthcare sectors, the commonality is the global exposure that many of the world’s top companies all exhibit. In fact, the failure to capitalize on foreign markets can really limit a company’s growth, according to my stock analysis. There are on ... Read More
You can’t deny it: there are outright signs of stress on the key stock indices. We see investors are worried, and they just don’t like risk. We see huge selling in the growth stocks, with names like Amazon.com, Inc. (NASDAQ/AMZN) and Twitter, Inc. (NYSE/TWTR); they are witnessing a huge sell-off and are now in bear market territory. The biotechnology sector is getting slammed—investors are hitting the bid and running for the exit. With all this happening, one question comes to mind: what happens next? Growth stocks can act as a leading indicator of what’s next for the markets. Are key stock indice ... Read More
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The S&P 500 recently traded at a record-high, just before tensions in the Ukraine erupted and the global stock market declined as fear of an escalation and war intensified. While the charts continue to show the stock market wanting to move higher after excellent gains in February, I still sense the upside moves will be more difficult to come by compared to what we saw in 2013. Even at this point, the Dow Jones Industrial Average and the S&P 500 are still negative this year. If the stand-off between the Ukraine and Russia doesn’t escalate, I would expect the ... Read More
Well, that didn’t take long! Just a few weeks ago, I wrote an article stating that investors should begin to worry about the lofty level of the stock market. Since that time, the S&P 500 has dropped by more than five percent in less than two weeks. This market correction won’t be a surprise to my readers, as I have been suggesting investment strategies that can help prepare your portfolio for a large downswing in the market for some time now. When I wrote the article in late January, the S&P 500 was surging, even though the preliminary Thomson Reuters/University of Michigan index of consumer sentiment dropped month-over-mo ... Read More
Though making money is important, that’s not the be-all and end-all behind smart investment strategies. Just think about the common phrase “a dollar saved is a dollar earned.” Success in trading and investing means you need to be aware of both the upside and downside risks, such as we are seeing now as the stock market moves lower. In general, investors should hold off on buying for now until we see some solid opportunities. Trading volume is rising on the down days, which confirms the selling pressure. As well, the Dow Jones Industrial Average has declined for five straight sessions, losing nearly four percent in that time. A look at the chart of the Read More
There’s always something investors are worried about. Recently, we heard about the U.S. government reaching the debt limit, shutting down, and inching close to defaulting on its debt. Investors reacted, and the key stock indices started to slide lower due to concern over what could happen. Now, with a deal being struck to extend the debt ceiling and budget deadlines, those worries are over, meaning U.S. creditors will get their interest payments and the government will go on operating as usual. Thi ... Read More
Over the Labor Day weekend, I met up with my old friend, Mr. Speculator. As always, we had a debate about portfolio management. We had a long conversation about what really is the right way to manage your investments—and, for that matter, if there is any. Should investors invest 40% of their portfolio in bonds and 60% in stocks? Should it be the opposite? Or is there another possible combination? He said, “Moe, I am a firm believer in going for the fences every time for now, but do you really think I will continue to have the same approach in the long run?” (Turns out, there’s actually a ratio ... Read More
Not too long ago, the per-barrel price of oil was hovering close to $85.00. Now, a few months later, it trades above $107.00; this is an increase of roughly 25% in a fairly short period of time. One may ask why this matters, and what it means for the overall U.S. economy. At the most basic level, the price of oil has a very deep impact on consumer spending, which makes up 70% of the gross domestic product (GDP) of the U.S. economy. It impacts consumers in ... Read More