Saturday, May 06, 2006

Lifestyle funds

Some fund managers advocate investing in lifestyle funds. For example:

- for young investors: high proportion of equities
- for older investors: high proportion of bonds

In my view, if the investment is for retirement needs, it is better to invest in equities, even for older people.

If you are now 60, the average lifespan is 20 years. If you draw down your retirement funds in monthly instalments, the average duration of your investments is more than 10 years. So, an equity fund is quite suitable.

When you reach age 70, you can consider to move some of the investments into a bond fund. At that time, you should choose the right time to make a switch. The stockmarket goes in cycles of 3 to 5 years. If you choose the right time during this cycle, you can get an attractive return.

Alternatively, you can cash out and invest in a life annuity.
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2 comments:

4everdreaming said...

This is really taking a different view for those who are in the older age bracket. However, I do agree with you that by taking some calculated risks they can stand to gain more during retirement and they can time the switch over to the bond fund or would it be good to consider the flexi-cash ?

May 08, 2006 6:04 PM
Tan Kin Lian said...

It is probably better to switch to a life annuity, as it guarantees payment for a lifetime, and provides a guaranteed sum with bonus.

May 10, 2006 10:28 AM

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