Planning to retire like a boss? Here are five smart investment tips

Highlights

  • Investing for a decent retirement is no rocket science but lack of knowledge and/or discipline makes it difficult for some people to achieve their goals.
  • Invest as soon as you start earning. It’s probably the smartest decision you can take.
  • Minimise your tax smartly by looking for legal tax breaks, investing in tax-efficient products, etc.

Who does not dream of having a comfortable and secure life in their twilight years? However, in order to ensure that your golden years are really sprinkled with gold, you need to put in some hard work along with a bit of a smart work. Investing specifically for retirement is simple but some people lack discipline while some lack the basic knowledge on how and where to invest.

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Also, everyone has a different kind of lifestyle, a different level of income, spending habits, goals, etc., which makes investing for retirement more of a personal skill which should be tailor-made for your specific goals. However, there are some basic principles of investing for retirement which are applicable to ever investor’s journey, irrespective of their goals or lifestyle. These smart investment moves could act as a catalyst for your specific corpus that you desire for your golden years. Let’s have a look at five such investment decisions that you need to incorporate in your investment planning for retirement.

  1. Start as early as possible

One cannot stress enough on the importance of starting early. Many people commit the mistake of delaying investing for retirement as the goal seems way too far with ample amount of time to cope up. However, investing late tends to distort the magic of compounding that you could pocket just by starting a few years earlier.

The whole essence of wealth creation is compounding at a decent CAGR (compounded annual growth rate). Invest as soon as you start earning. It’s probably the smartest decision you can take.

  1. Increase diversification as you age

Diversification is a method to reduce the concentrated risk of any one asset in the portfolio by investing in several assets. However, when you are young, you have a higher risk appetite and therefore you can afford to take higher risk for a potentially higher return.

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While young, you can try to invest more aggressively as you have sufficient time to cope up in case investments don’t play out as planned. But as you age, you should get more conservative and stay away from risky investments.

  1. Have realistic expectations

Many people invest in risky assets such derivatives or penny stocks in a hope to make windfall profits that would help them meet their goals well ahead of time. Becoming greedy seldom ends well in the market, often leading to sheer disappointment.

The minimum goal for you should be to beat the inflation first; coping up with the broader market returns comes later and is a decent expectation. In fact, most of the professional fund managers have difficulty beating their benchmark index post-cost.

  1. Watch out for your taxes

During your entire investment journey, you would be paying taxes on your returns and other incomes. However, these taxes can massively dent your post-tax returns over a long haul which you need to be careful about.

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We are not saying to not pay your taxes, but to minimise them smartly. Investing in tax efficient investments, looking for legal tax breaks or even hiring a well-qualified CPA could save you considerably on taxes.

  1. Don’t forget Estate planning

Estate planning is an essential part of your retirement. You would be requiring a lawyer, an accountant and other professionals to take care of your entire wealth in case you could no longer be there.

If you wish to leave your assets behind for your family or a charity etc. then you must have it all planned which could also help in avoiding legal troubles your nominees may face after you.

Bottom line

Starting to invest for a desired retirement could seem a bit too early during your 20s or even 30s. However, the earlier you start, the more risk you can take to rake in a potentially higher return. To enjoy the benefits of compounding, you need to provide ample amount of time for your investments to grow.  

Read more: 3 Tips for a secure retirement

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