Chosing Stocks For Retirement

Since a balance between stocks, bonds, and cash should be established for those with an investment portfolio, it is recommended to use the following formula (especially when you're nearing the retirement age):

 Subtract your age from 100. The difference should be the percentage of stocks in your portfolio.

Ex.: If you are 45: 100 – 45 = 55. Therefore, stocks should make up 55 percent of your investment portfolio.

The older you get, the less you should opt towards investing money in the stock market because of its tendency to fluctuate sharply and rapidly. Less exposure to risky investments will give you more peace of mind in the long run and provide you with a more stable investment plan.

To avoid the ups and downs in the stock market, it is recommendable that you distribute your stocks among different categories: large cap, mid-cap, small cap, micro cap, real estate investment trusts and foreign stocks. Investing in different sectors (energy, finance, technology, consumer, etc.) will help you keep the balance in your investment plan despite sudden rises or drops in the market. How? Simply take some part of your stock should a sudden rise occur in one of the sectors and redistribute it among the other categories. That way you can keep your investment plan and a healthy part of your portfolio in shape.

Lastly, let it be a reminder that in balancing out your portfolio, you should neither be too risky nor too restrained. Know your options and study different alternatives to maximize the lucrativeness of your investment plan and make the most out of your money-making ventures.