How to Build a Portfolio for Your Retirement

Making smart investments for your golden years.

If you are reading this, you’ve decided to plan for your retirement. Congratulations! You have achieved the first step in creating your retirement portfolio!

Your portfolio will make it possible for you to live the retirement you’ve always wanted without having to worry. Investment can be a great way to protect and build your savings. Investing in profitable sectors, certain currencies, gold, real estate, and more can make all of your personal and fiscal goals come to fruition.

Below, we have gathered some of the steps for a successful portfolio. Before we begin, however, it’s important to note that it is never too early to begin thinking about your retirement. When you set your goals early, you will be able to allocate your money intelligently, earning you the money you need. Starting early also means you won’t be rushing last minute to have the life of ease.

How Much You Will Need?

Before you begin to build your portfolio, you will need to determine how much you will need to earn in your endeavors. After you do that, you calculate how much that means you’ll have to save each year. With this first step, you will be able to accurately choose investments that will help reach your goal.

A simple way of determining how much you’ll need to save for retirement is taking 80% of your pre-retirement income, subtracting any source of income that you’ll be receiving during retirement (Social Security, pensions, etc), and then, using the 4% rule, multiply this number by 25. This is a rough estimate of home much you’ll need to save to live when you are done working.

While there is no way to say how much exactly you will need for your retirement, it’s common that a 7% average annual return is expected.

Asset Allocation

This step in an investment strategy balances risk and reward by allocating assets based on an investor’s goals, risk tolerance, and plans for future investment. This is one of the most important decisions for an investor.

Depending on your goals, there are different asset allocations. For example, if you are saving for a car within the next year, the savings may consist of cash, short-term bonds, and certificates of deposit. A long-term goal, like retirement, which could be decades away, is typically invested in an IRA in stocks because the investor has enough time to ride the flow of the market.

There is no perfect way to allocate your assets. Individuals who already have a large amount of money will be able to make more risks and even just save some money in the form of cash since they are closer to have sufficient funds for retirement.

Diversification

According to Modern Portfolio Theory, diversification is one of the cornerstones of a successful portfolio. In fact, diverse portfolios outperform a concentrated one. By owning a large number of investments in more than one sector or asset class, investors can protect themselves from unsystematic risk, the risk that one encounters when investing in one particular company.

If there are 12 or more stocks in a stock portfolio, unsystematic risk is almost completely eliminated. Systematic risk is always lurking, however. By investing in non-correlating assets, you can protect yourself from volatility.

Non-correlated asset classes are investments like bonds, commodities, currencies, real estate, fine art, and cars.

The non-correlating assets fight volatile markets because each asset class reacts differently to changes in the markets. You will find that there will be times when one asset is not performing well, while another may be thriving. Investors who keep this in mind receive a balanced return and skip the highs and lows of a poorly performing market.

Check-In

When you have your portfolio put together, you may feel confident in its ability to allow you to live comfortably. While this may be true, it’s important to see how it’s doing every now and then.

You may want to make adjustments to your allocations as time goes on, a common practice for investors every couple of years. Some experts say to do this every five years. The check-in is also a good idea because you should always be aware of how your portfolio is performing.

Ask for Help

If you feel like you are in over your head, don’t be afraid to reach out to an expert. This is what they are here for. If you aren’t comfortable with an investment you have made, or just want to get a second pair of eyes on your portfolio, a financial expert would gladly help out.

Alpen Partners Wealth Management International AG, the sister company of Alpen Partners AG, is now a registered investment advisor at the U.S. Securities and Exchange Commission (SEC). Together with our partner Swiss private banks, our company can now offer the full Swiss private banking experience to American clients, both resident and non-resident.

At Alpen Partners , we believe the journey through financial planning and investment shouldn’t be done alone. Whether you are well-educated in the world of finance or you are just hoping to earn money through simple investment, an advisor can be by your side, guiding you through every step.

When looking for a wealth manager, don’t you want to know that your investments and wealth are in good hands? So do we. That is why Alpen Partners has chosen to register with the Securities and Exchange Commission as an investment advisor. SEC-registered advisors are certified and tested and can offer elite financial planning and investment advice.

Through a rigorous investment process, our investment committee then decides on an asset allocation that takes into account variables like the liquidity of the investment vehicles and the diversification in terms of regions, sectors, and currencies. Combined with a rigorous macroeconomic and graphic analysis, we then create a portfolio that will achieve the best performance at a given volatility.