How Online Trading Fits Into A Retirement Plan
How Online Trading Fits Into A Retirement Plan – by Chrissy Davidson
Considering that retirees need at least $100,000 in savings to top up their NZ Super, retirees are thinking up ingenious ways to boost their nest egg. With the average interest rates well below inflation, simply sticking to a savings account may not generate a sufficient return when retirement rolls around. After the market crash in 2008 which saw millions of pensioners out of pocket with seemingly safe investments, there are a few that dip their toes into online trading to make up the difference. Discover how a calculated approach to trading can buffer that retirement income safely.
Understanding and Mitigating Potential Risk
One of the biggest reasons investors become disillusioned with investing is through loss. This is mainly attributed to the lack of knowledge regarding the potential risk of any investment. Unscrupulous brokers may try to sell a high-return investment scheme with low risk, but that is simply not possible. Investors should at all times be cautious with their investments and understand that there is a direct link between the potential of return versus the risk of their investment. With that understanding, even online trading becomes fair game for those looking to bulk up their cash reserves.
Using the Surplus Instead of Reserves
Building up some reserves for a rainy day is important and should be in a guaranteed saving or investment account. Those who wish to try their hand at online trading, should only do so with their surplus funds. Not only will this leave them with their rainy-day fund intact, but will also ensure that they don’t suffer a massive financial loss should the markets turn. This also means that all the eggs are not in the same basket. This means keeping money for savings and investments separate, as they are not the same thing.
Follow the Advice of Market Leaders
Investors wouldn’t trust their investments in the hands of just anyone, which is why it’s important not to take investment advice from someone who doesn’t show financial acumen. Instead, it’s important to take advice from those who have the financial resources to back their strategies. Warren Buffet, for instance, has a strategy that involves investing in index funds which could serve future retirees well in their journey to financial freedom.
Traditional retirement planning routes may not always pan out when unscrupulous investors cause the funds to dry out. It’s up to retirees to ensure they have multiple avenues to build up their fund. When Online trading forms part of that strategy, research and patience go a long way.