Four questions about protecting your nest egg
With all of the volatility and uncertainty in the stock market these days, those saving for retirement have to keep a few basic rules in mind to balance performance with investment safety.
Maury Randall is Chairman of the Rider University Finance Department. He said those trying to grow their retirement nest egg should be asking themselves a few basic questions about their retirement investments:
Am I properly diversified?
With all of the volatility in the stock market, with the fact that interest rates, at least on safer securities, are really at very low levels, whether you are talking about very short term instruments, savings accounts, short term bonds, or whether you are talking about government bonds, all of those rates are very very low. But at the same time, Randall says you have to be careful.
Do my holdings match what my needs are?
According to Randall, it's important to get a decent stream of income from whatever you're investing in.
"I would say within the stock sector, probably if you are looking at retirement, you should look for stocks that tend to be a little bit more on the safe side and tend to have high dividend yields," Randall said. "Some of the stocks that might be in that type of category would be companies like AT&T, Verizon...companies like that. And there are a number of other companies, perhaps a company like General Electric. Companies that have solid credit ratings, that have relative high dividends."
What's my stock outlook?
In other words, according to Randall, what are you eventually hoping for with your portfolio, where do you want to be?
"This is really the major dilemma for people who are going into the retirement years, at least outside of their Social Security, the cash flows that are available right now are really relatively low," he said.
Randall also advises having some short-term securities, such as short-term bonds, because even though the rates may be low on those as well, if interest rates should rise, you can shift those securities into higher-yielding securities as well if the market should change.
Do I feel comfortable, given my outlook, with what I'm currently holding?
Randall advises investors to do their homework before opening their wallets.
"They can do that through exchange-traded funds," he said. "They can do it through mutual funds. They can find out which are the riskier funds and which are the less risky, and then try to just get a less risky portfolio that would give them a decent cash flow, given the current market. That may be the way to go if they are doing it themselves, or even if they are going through a financial advisor."
Randall said people should "ask questions of the adviser and make sure that that adviser is really giving them something that they understand. They should know what they are getting into if they do go to an adviser."
"It's important that you try to get a decent stream of income from whatever you're investing in. But at the same time you don't want to take too many risks," He said.
Investment diversity, he said, is a constant work in progress. For bond investments, good corporate bonds might make more than government bonds, which are at record low yields.
More From New Jersey 101.5 FM
