The financial world accommodates every type of investor and offers opportunities for building your savings at every stage of life. As you evaluate your investment strategy for reaching your goals, consider these guiding principles. Your financial professional can help create an investment strategy to help you reach your goals.
Guard Against Inflation
Inflation, or an increase in the cost of living, can reduce the value of your investment. To ensure that you'll have the money you want in the future, you need an investment that seeks to grow faster than the rate of inflation. Take a look at how inflation has affected some of our everyday expenses over the past 23 years.
The dollar you had in 1980 buys only 45 cents worth of goods and services today. That's because inflation has caused your purchasing power to plummet. Even modest inflation, say 3 percent a year, can undercut the purchasing power of your dollar. This is particularly important to new retirees. Assume that $2,000 a month will provide you with a comfortable income at retirement. After 20 years with inflation averaging 3 percent, you would need $3,612 per month just to maintain your standard of living! That's where investing can help.
Diversification Can Reduce Market Risk
When you invest in securities, you incur "market risk." This is the risk that the stock or bond market will decline, and securities within those markets will lose value. The best way to help cushion your portfolio against market risk is to diversify - to divide your money among different types of investments. Diversification is important because each investment responds differently to economic events and other market conditions, as well as to the problems of a particular company or bond issuer. Over the long term, a mix of investments could help maximize the potential returns of each asset class without taking on more risk than you can comfortably withstand. Diversification does not, however, assure a profit or prevent a loss.
Risk Versus Reward
No matter what type of investment you select, there are risks and rewards associated with each. The trade-off is simple. The greater the market risk, the greater the potential reward or return. The level of market risk that you're comfortable with depends on a variety of factors. They may include:
- Personality
- Perception of market conditions
- Fear of inflation eroding your purchasing power
- Need for immediate funds to meet financial obligations
One of the most important factors in determining your market risk tolerance is the number of years you have to invest toward your goals. If your funds will be invested for more than 10 years, you are more likely to be able to ride out short-term market ups and downs.
Time Is On Your Side
Over the long term, volatility has historically decreased as an investment's time frame increased. For example, if you buy an equity investment and hold it for the short term, it is subject to a greater degree of volatility, but as your holding period increases, the ups and downs of the market tend to even out. Buying equities and then holding them for the long term is a way potentially to reduce market risk.
Choosing the Best Time
Timing, along with market risk, are the two biggest concerns investors face when considering equity investments. Unfortunately, even experts can't predict the markets accurately and consistently. What's important is that you choose an approach to investing that suits your goals and risk tolerance. Also, be sure to reevaluate your plan objectives with your financial professional periodically.
Talk to an agent or advisor about how Symetra annuities can fit into your investment strategy.
Securities are offered through Symetra Securities, Inc., Bellevue, Wash. 98004 (800) 528-6501. Fixed and variable annuities are issued by Symetra Life Insurance Company, Bellevue, Wash. 98004.
