When I ask people why they retired, or if still working, when they will retire, I often hear one or two reasons. Almost no one tells a complex story. The particular experiences vary among people, but not the degree of complexity. Continue reading
During working years we often do things under pressure—to provide for our families, to advance our careers or maybe to set an example for our children. But in retirement many of these obligations fade into the background. So the choices we make seem to beg for reasons.
A great deal!—to answer the title question. Three examples will illustrate the loss associated with active investing, or, stated positively, the gain from passive investing. The examples build on last week when I showed that active and passive investing had to achieve the same average gross returns. Yet active investing costs more, so in the end, the net returns to retirees are smaller with active investing.
Active investing links retirees with financial planners, brokers and actively managed mutual funds. Active investors believe they can identify low-priced stocks to buy, or that they can predict which stocks will drop in price so they can sell. In addition to individual stocks and bonds, they often buy actively managed mutual funds where a fund manager does the buying and selling. Continue reading
Many retirees invest passively by buying shares in low-cost index funds that are designed to track selected markets. I have illustrated that approach in previous posts.
Many other retirees, and many younger investors, actively manage their investments. Some retirees do their own research and analyses while others hire brokers, financial planners or other advisers to manage their investments. They hope to achieve superior performance—to beat the market—by relying on extra effort, knowledge and skill. Continue reading
Good investment literature always recommends diversification. It counsels investors to forget about trying to pick the next Apple or Microsoft. That is a guessing game, and the odds are against small investors. Here at Later Living, I have followed the literature and used example portfolios consisting of broadly diversified stock and bond index funds. Today I will include real estate, or REITs, in the retirement portfolio.
REITs are real estate investment trusts, and they owe their modern form to legislation enacted in 1960 and subsequently modified. REITs provide investors easy ways to participate in investments like apartments, office buildings, shopping centers, timberland, and others types of income-producing real estate. Continue reading
For retirees volunteering usually beats work. Volunteers are not usually competing against co-workers, are not facing pressure to make economical use of time, are not usually micro-managed or given impossible deadlines and are not ordinarily forced to accommodate oversized workplace egos. Instead, volunteers can focus on the work experience itself. Continue reading