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To Conserve or Invest?





 

When we talk about retirement, a major problem that comes to mind is: How should we manage our assets after retirement? Without a salary or stable income source, we immediately feel that we can no longer afford to lose money, and thus we should be very conservative in our wealth management.

I have to agree that, to a certain degree, conservative wealth management should be adopted after retirement. But that does not necessarily mean that you should be over conservative, simply placing all your money in the bank just for the interest income.

Unless you have a huge sum of money, it will be difficult to pay for a long retirement if you are too conservative in your wealth management.

Today, improving technology advancements continue to extend our life expectancies. The average life expectancy now exceeds 80 years of age. This means that if you retire at 60, you still have more than 20 years of retired life to cover. You may also find that your children are less eager or unable to support you, particularly today where the concept of raising a child for security in one's old age is outdated. So you need to plan ahead financially for the next 20 or 30 years of your life.

In my opinion, we still need to invest after retirement, especially in equities. It is true that there is risk attached to stock investments, but as long as the selected stocks are in a market where economic development is growing healthily, there is relatively little risk for long-term investments. Over a period of 20 years, bullish and bearish markets are bound to happen alternately many times. However, as long as you take it easy, neither panicking nor being too greedy, you can remain safe and sound as the storms of the stock market rage on, to enjoy long-term investment returns.

It is important to know how to diversify your risk when looking after your retirement investment. Part of your funds can be used to purchase common stocks with a good dividend returns, holding them over the long term for their dividends. If you are not comfortable about identifying these stocks yourself, you can consider investing in a fund, letting the investment specialists do the work for you. If you have the financial capability, you can also consider purchasing a flat for its rental income. Of course, an important factor to keep in mind as a retired person is not to get yourself into any further debt when you purchase property. You should be able to pay for the entire purchase without any borrowings. In my opinion, buying property for rent provides the best investment hedge against inflation.

If money is tight, there is another financial solution that can be considered. Reverse mortgages are now being offered by banks. Under this arrangement, banks pay you a monthly sum during your lifetime, ultimately inheriting the property from your estate. As for the next generation – don't worry, they are bound to find their own way!

Dr Chan Yan-chong


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