Investing for Retirement
Investing for retirement may be one of the most reasonable investment objectives. Sometimes, people invest so they can afford expensive things that they otherwise could not afford without investing. For example, people might invest so they can get enough money to buy a car (if they don‘t want to take loans from the bank), or a nice vacation or college tuition for their children. If the goal is to save money in a 3-5 year period, this is more saving money rather than investing.
While this saving-investing process can meet all the criteria of investing, if it is low return and low risk, the results will not be much different from a regular savings or checking account (click here to open a checking account).
Most of the time people are investing without a particular purpose. They just want to be wealthier and feel more financially secure. Or they just have some extra money and would rather have that money earn interest (which is very logical) and not have inflation affect it.
After all, most people want to have financial security (if you want to know if you are one of them you can check it at Funny Test). Investing without a reason is similar to investing for retirement because investments are typically a long term thing.
Investing for retirement has a very clear purpose – it is a reliable cash flow from when you are retired and not working anymore. Just because you invest for retirement doesn’t mean that you have to wait until a certain age to access that money. If you can comfortably live off of the interest and dividends from your portfolio, then you can quit working and turn to hobbies well before the official retirement age.
All in all, investing for retirement is not much different from standard long term investing. The best investments are the same: stocks, bonds, real estate. Their proportions depend on the risk profile, the investor's personality and the period still left to retirement. Since investing for retirement is a long-term project, high risk-return investing is recommended to achieve higher efficiency, while approaching the retirement age; the risk profile should be gradually reduced over time though.