Investing for Retirement
Investing for retirement - may be one of the most reasonable investment objectives. Sometimes, people invests to acquire some expensive thing if cannot it afford without investing, for example a car (if they don‘t like loans from the bank), or some expensive intangible purchase like a long trip or education of the children. If the goal is to save money in 3-5 year period, this is more money saving rather than investing.
While this saving-investing process can meet all the criteria of investing, but it should be driven to a low return and low risk, so the results will be not much different from regular money saving in the bank account.
Most of the time people are investing without a particular purpose. They just want to be wealthier and feel safer. Or they just have some extra money and want that money to work creating more money (which is very logical) but not erode over time because of inflation.
After all, most of the people just love to have the financial safety (if you want to know if you are one of them you can check it at Funny Test). Such investing without a reason is similar to investing for retirement, because investments are oriented for long term investing and most of the times wealth is held until retirement.
Investing for retirement – a specific purpose
Investing for retirement has a very clear purpose – it is a reliable cash flow from investments when you will be not more capable to work hard, or just you wouldn’t want to. Investing for retirement does not mean that money received from the investment could be used only at official age of retirement. If you can live only from interests and dividends from your investment portfolio without loss of life quality, then you can quit working and turn to hobbies well before the official retirement age.
Basically investing for retirement is no different from the standard long term investing. The main best to choose 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. As usually investing for retirement is a long-term investing, therefore high risk-return investing is recommended to achieve higher efficiency, while approaching to the retirement age; risk profile should be gradually reduced.
