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It is often said that investors should look for long-term steady returns instead of short-term windfalls. When things go smoothly and as expected, it is easy to become overconfident and overlook the risks. When it comes to retirement investment, this could result in irrevocable losses. Prudent risk management is the key to retirement investment.

 

Tips from financial planners

Investments come with risks. Can you get by without making any investments? Investment is a way to build our nest egg for retirement. For retirees, inflation risks may outweigh investment risks. Like Mr Ho, those who are planning for retirement should consider the following when managing their investments and wealth.

Don’t put all your eggs in one basket

Stock investment is popular in Hong Kong, and makes up a main part of most people’s investment portfolio. However, it is important to avoid concentration risks by investing in just one asset class only. Since the risk-return of stock investment is relatively high, those who will retire soon should consider reducing the proportion of stock holdings in their portfolio, and avoid investing in high risk-return stocks such as small-caps.

Even the best fund managers cannot predict the market accurately. Therefore it is better to manage risks through diversification. If you would like to diversify your investment but are not confident of managing too many investment products, ETFs or funds may suit you.

Stable cash income

Retirement life is all about stability, but not everyone is fortunate enough to have a pension that offers a steady stream of income in retirement. While pension has almost become a thing of the past, people are looking for instruments that can provide a steady stream of income that can be likened to a pension. For example, annuity is a form of insurance that is often used for providing a passive stream of cash income in retirement. Depending on the terms of the annuity, policy holders can receive regular payments from the insurance company over a fixed term or lifetime.

If you own a self-occupied property, you could consider subletting part of it like Mr Ho, or take part in Hong Kong Mortgage Corporation’s Reverse Mortgage Programme so that your self-occupied property can generate cash income for you.

 

25 April 2018