Thinking of retirement, who would not picture oneself living a comfortable life, the fulfilment of years of hard work? I think it would be safe to assume that most of us would. Of course, this idyllic picture would see us retaining the same standard of living we have been enjoying in the years leading up to retirement. The follow-up question would be, “How may we ensure we are using the right investment strategies to financially plan for our future, and when should we start planning?”
In reality, many investors tend to procrastinate planning for their retirement, potentially because they do not have a clear idea of when or how they should start planning their investments. Yet, investment planning is an important variable of any sound financial plan. It would be sensible to start investing at an early age, typically when one is between 20 and 39. However, in practice, most people do not plan actively for their retirement before they are close to retirement age. Why? Typically, because they lack the confidence to do so. Yet, one does not need to have a significant capital available to start investing. Starting to invest early affords important benefits, primarily being able to tailor one’s investment strategies to fit the different personal circumstances at different times in one’s life.Drip investing is a popular investment strategy that enables an individual to invest regular monthly savings. This flexible option spells important benefits for the investor, including diversification of investment, access to different markets and a spectrum of asset classes whilst effectively making small contributions on a regular basis. Furthermore, Monthly Investment Plans enable the investor to withdraw funds should the need arise. Having said that, it is still advisable that once an individual kicks of an investment plan, s/he sticks to it and maintains a long term time horizon in view.The success of this strategy depends primarily on investing sooner rather than later. Having said that it fits different profiles of investors. For instances, there is the young investor looking to start building an investment portfolio, the investor who is thinking about his grandchildren and would like to plan for their future, or the employer wishing to offer investment alternatives to his employees.Be PreparedBefore embarking on an investment strategy, one must plan ahead thoroughly. For instance, it is critical to understand well one’s financial objectives. Thus one would be better able to make decisions to meet those objectives, whenever an opportunity arises. Determining the timeframe is another important consideration. Case in point, the timeframes and goals for a person investing for retirement would be different from those of one who is investing for his/her child’s future.
Here it would be interesting to refer to the recently launched BOV Asset Management Investor Sentiment Index. This Index reveals that half (52%) of the Maltese investors seek to generate an additional source of income. Only 12% invest solely to grow and increase their capital, whereas another 38% seek to generate an additional source of income whilst concurrently increasing their capital investment.