What is the best investment strategy for retirement?

What is the best investment strategy for retirement? There is a tried and tested answer to this question. The generally accepted wisdom is that you should hold the percentage of bonds in your portfolio that matches your age in years. So if you retire at 65 you would have 65% bonds and 35% stocks. If you started investing when you were 25 years of age you would start with 25% bonds and 75% stocks and then each year you would rebalance your portfolio moving 1% more into bonds.

Other accepted tenets are that your stock portfolio should mimic the market and your bond portfolio should cover a spread of riskier and low or no risk bonds.

The simplest and most efficient way to create a stock portfolio that mimics the market is to select low-cost ETFs that track market indexes. It is a good idea to have broad exposure to different levels of market capitalization. This is easily done by for example having one ETF that tracks the Standard and Poor’s 500 for large-cap exposure, one ETF that tracks the Standard and Poor’s 400 for mid-cap exposure, and one ETF that tracks the Russel 2000 to cover small-cap.

The idea is that the bonds deliver income in the form of coupons, some stocks deliver income in the form of dividends and the stocks in your portfolio should deliver capital appreciation so that your principal will not be eroded by inflation. There are variations on this model, including adding real estate to your portfolio which should also pay you income stemming from tenant rents.

The sacred principal

This approach to retirement financing creates this somewhat inaccurate and artificial division in our minds. We view money that flows into our account from dividends or bond coupons in a different light to the capital value of our investments.

Somehow the capital value or principal is upheld in our minds as sacrosanct and in need of preservation at all costs, while the income stream is the cash we are allowed to spend.

While this view is on one hand overly simplistic it also doesn’t really work in today’s economic conditions and market environment.

Interest rates at all-time lows

I hope everyone will have realized by now that interest rates of around 0.5% on savings accounts and not much more available from bond coupons is derisive. You can reasonably say that most economies of the world have been cut off at the knees by the impact of the pandemic and central banks have a legitimate task to do what they can to rescue us all.

For the retiree living off investments, it means you really have to know how to navigate these economic conditions to stay financially secure through retirement.


While interest rates are at all-time lows, inflation is still lurking in the shadows. It is easy to focus on the Consumer Price Index or CPI as the main indicator of inflation but that may miss the point.

If in your retirement you are just going to be buying the same basket of goods used for the CPI then you know what you are looking at. If you are interested in what the CPI did over the last few years, here’s what it looks like

CPI 2017 to 2020

Data source 1)US Bureau of Labor Statistics

What is interesting is the variability of inflation in the components of the CPI. For example at one end even though in 2020 the CPI was 1.4% some items like meat, fish, eggs, and dairy went up by 4.5%, and food at home in general increased by 3.9% while at the other end gasoline went down by more than 15%.

This article explains all the different inflation rates for the elements of the Consumer Price Index.

Higher risk bonds

While the old stalwart of treasury bonds or T-bills will pay above these derisively low rates depending on their term, lower grade and therefore higher risk bonds will pay more. Even with lower grade municipal bonds though, the yields only get up above 1% if you go for a 5-year term. Twenty-year municipal bonds current yields are still only 3.75%

Dividend-paying stocks

Another approach to receiving an income stream is to purchase high dividend-paying stocks.

Since stocks pay dividends every quarter, a clever way to do this could be to hold one set of high dividend stocks that payout January, April, July, and October, then another set that pays out February, May, August, and November, and a third set that pays out March, June, September, and December.

Again though you will be hard-pressed to find stocks that payout dividends of more than about 3.5 to 4% and some pay annually or semi-annually or just whenever they choose to. What’s more, there is no obligation on a company’s board of directors to pay dividends. In an economic downturn or if the company just falls on hard times they can decide to cut or just eliminate dividends altogether.

Real estate

Another approach to obtaining an income stream is from investments in real estate. With a large portfolio, general guidance says that it is reasonable to invest between 5% and 15% in real estate. However, I would note that investors who are experienced with and understand real estate are likely to hold a larger portion of their investments in this asset class.

Real estate has its own advantages and risks. The one potentially big advantage is that the returns on real estate tend not to be correlated with the stock market. So building investments in real estate could be a good way to diversify your portfolio.

Like other areas of investment, to do well in real estate investing you need to do your homework. You need to pick funds or projects that have a good chance of success.

This article explains many different ways to start investing in real estate.

And this article explains a particularly interesting vehicle, real estate crowdfunding.

Higher risk lower return

However, sticking with stocks and bonds if you adopt all the formulae above to a retirement portfolio in the current economic circumstances it will oblige you to look for high yield assets and you will actually be taking on more risk than is necessary.

In short, the classic approach to income yielding investments will not cut it in today’s economic environment.

Total portfolio approach

The total portfolio approach accepts that stocks perform well some of the time and bonds perform well at other times. The other reality it faces is that interest rates and dividend payments are pitifully low and any over-reliance on these will likely result in very poor results and a low income during the all-important retirement years.

Instead of creating a portfolio of income yielding assets such as coupon paying bonds and dividend-paying stocks you create a portfolio that is balanced between the different asset classes of stocks and bonds, but the stocks provide appreciation to hedge against inflation while the bonds act as a store of value when stocks are under-performing.

You don’t go out of your way to find income-producing stocks or bonds. Instead with the total portfolio approach, you focus on total returns and reducing volatility and hence risk.

You make disbursements from your portfolio into cash by liquidating assets depending on what has performed well while rebalancing your portfolio. The general principle most advisors suggest is that you would draw down on the total value of your nest egg at a fixed rate of 4% a year.

As noted the bonds act as a store of capital for times when stocks haven’t done so well. If you invest in a market basket of stocks then the expected return will be around 10% a year. But that 10% will come with substantial volatility.

This article examines stock market returns over the last 30 years and other 30 year periods.

If we update the chart of annual returns of US stock markets as measured by the Standard and Poor’s 500 index to include 2020, this is what we get.

S & P 500 annual returns 1927 to 2020

Data source2)Macrotrends S&P 500 Historial Annual Returns

Obviously, all that volatility could play havoc with your retirement if you didn’t smooth out those returns.

Running some numbers

So much for theory. Let’s get real and run some numbers.

I will assume that a couple has built a $2 million nest egg over their years of earning, saving, and investing and that they are retiring in the year 2000 and will need their funds to last until 2020.

I propose to look at three different portfolios.

Portfolio 1 is composed of 40% bonds covering a range of grades and 60% comprising a basket of stocks that tracks the performance of the Standard and Poor’s 500 index.

Portfolio 2 takes a more risk-averse approach. It is composed of 50% of only the very safe government-guaranteed short-term (3-month) T-bills, the other 50% comprises a basket of stocks that tracks the Standard and Poor’s 500 index.

Portfolio 3 is more aggressive and consists of 10% bonds of lower grade and hence high risk and return 80% a basket of index tracking stocks like the other two portfolios, and 10% real estate.

For the basket of stocks that track the Standard and Poor’s 500 index, we will assume that all dividends are reinvested.

For the blended bond portfolio, we will take an equal mix of 3-month Treasury Bills, 10-year Treasury Bonds, and corporate bonds of BAA grade.

For the real estate portion, we will assume a portfolio of diversified REITs.

All of these investments are very liquid, so we would have no issues liquidating any of them and rebalancing the portfolio as needed.

To simplify this a little we will take the returns from the previous year and use that as our income for the current year. There is a certain logic to this. We can imagine that on 1 January we look back at the performance of the portfolio over the previous year, and liquidate whichever were the best performing assets in descending order until we have liquidated 4% and then rebalance the portfolio for the coming year.

I’m also going to run the simulations using two kinds of withdrawals, firstly fixed at 4% of the total value of the portfolio, then secondly starting in the first year at 4% of the portfolio value but then in subsequent years withdrawing that same amount in inflation-adjusted terms, so that your purchasing power stays constant through the years.

The chart below shows the annual returns of the components of our three portfolios and the annual rate of inflation from 1999 to 2019.

Annual returns stocks bonds real estate 2000 to 2019

Data sources stock and bonds returns 3)S & P 500 and bond historical data NYU Stern

Date source REIT annual returns4)National Association of Real Estate Trusts

All calculations and simulations by https://badinvestmentsadvice.com/

Portfolio 1: 40% mix of bonds, 60% stocks

Before we can get down to business we have to calculate the return on our bond portfolio for each year. We said it would be an equal mix of 3-month T-bills, 10-year T-bonds, and corporate grade BAA. Tabulating that against the returns of our stocks would look like this.

Annual returns S&P 500 and bond mix 2000 to 2019

So on 1 January 2000, we look at the performance of the components of our portfolio and before any withdrawals, we have $800,000 in bonds and $1,200,000 in stocks. Looking back at 1999 our stocks returned 20.89% while our bonds returned -0.92%, so not a good year for bonds.

According to the total portfolio approach, we would withdraw 4% of the $2 million, i.e. $80,000 in this case entirely from the stock part of the portfolio.

Actually, the only reason we would want to do that is to reduce any transition costs. If there are no trading costs, fees or commissions then it doesn’t matter where we take the withdrawals from since we will be rebalancing the portfolio at the same time. But even though most brokers don’t charge fees or commissions on stock or ETF trades, there will always be slippage so we want to minimize turnover to reduce that effect.

We would be left with $800,000 in bonds and $1,120,000 in stocks totalling $1,920,000. We would then rebalance our portfolio moving $32,000 from bonds into stocks to achieve the balance of 60% stocks and 40% bonds.

Essentially, at the beginning of each year, we would then rinse and repeat.

This is what that would look like starting at the beginning of the year 2000. Since in this scenario we withdraw the total sum for the year at the beginning of the year, I’m also showing that sum adjusted for inflation for the whole year.

Retirement portfolio 1a performance 2000 to 2020

That is the sort of thing that can happen when you retire.

There will just be times when the market suffers a down period and you have the bad luck to retire just when that happens The year 2000 was right before the dot com bubble burst. That ushered in three years of downward movement on the stock market. The next big nasty was triggered by the sub-prime crisis and the damage of the ensuing recession of 2008 and 2009.

Under this scenario, the annual withdrawals never made it back to the purchasing power of the first year of withdrawals after we factor inflation. As we can see there would be some fairly lean years if this was the sole source of income.

On the other hand, the portfolio still has a value of $2.8 million. That tells me that if they needed to continue making withdraws this system would not run out of money, probably not even for another twenty years.

Let’s see what happens with this scenario if we withdraw an amount that equals 4% of the initial total value and then an amount every year that would maintain the same purchasing power of the first year’s withdraws.

Retirement portfolio 1b performance 2000 to 2020

At least in this case our couple would not see an erosion of their purchasing power over the 20 year period. The total portfolio value is now $1.8 million. We don’t know what the returns from the different asset classes over the coming years would be but it is clear that the larger withdrawals, in nominal terms will eat into the portfolio value and at some point in the future the couple will run out of money.

Portfolio 2: 50% 3-month T-bills, 50% stocks

Now we will take a look at how the couple would do if they were much more risk-averse.

We adopt the same approach as in portfolio 1 above. In the first case let’s look at how their finances would look if they withdraw 4% of the total value of the portfolio every year. Again we make the withdrawal by liquidating some of the assets that have performed the best and then rebalance the portfolio to achieve the desired asset allocation.

This is what that would look like.

Retirement portfolio 2a performance 2000 to 2020

So, in this case, there would also be some very lean years and at the end of the 20 year period, the purchasing power of the annual withdrawals is just 67% of what it was at the beginning. That would hardly make for a very rewarding retirement. On the other hand with a portfolio value of $2 million after 20 years, the approach does look that it could be sustained for some years into the future.

As we can imagine the situation looks less sustainable if we make withdrawals every year with the same purchasing power. This is what that would look like with portfolio 2.

Retirement portfolio 2b performance 2000 to 2020

With a total portfolio value after 20 years of $0.9 million with this rate of withdrawals, the couple will likely run out of money in a few years depending on what the market does.

Portfolio 3: 10% low grade bonds, 10% real estate, 80% stocks

We are going to follow exactly the same approach for the other two portfolios. Firstly giving our retired couple 4% of the total portfolio value as an annual withdrawal and then rebalancing the portfolio. This is what that would look like.

Retirement portfolio 3a performance 2000 to 2020

In this case, there were more than a few lean years. In 2009 the purchasing power of the annual withdrawals was half that of the withdrawal in 2000.

On the plus side by 2020, the inflation-adjusted value of the annual withdrawals would exceed the value of the withdrawals in the year 2000 by a small margin. Also, the total value of the portfolio in 2020 was $3.2 million so they could probably continue indefinitely and leave a decent legacy at the end of it.

This is how portfolio 3 would have behaved if they had made withdrawals at the same inflation-adjusted value.

Retirement portfolio 3b performance 2000 to 2020

It looks like they would have survived. Though there are times when they would have been close to losing it all. In 2009 the total value of the portfolio dropped to $1.1 million. If there had been a few more bad years of low or even negative stock market returns then they would likely be in a hole they could never climb out of without adjusting their withdrawals.

Also with a total portfolio value of $1.9 million and ever-increasing nominal value of the annual withdrawals, this approach main not be sustainable indefinitely with any degree of comfort.

Another portfolio

Looking at how the three portfolios have performed over the 20 year period, I would be tempted to try one more portfolio. How about a mix of assets that achieves less volatility of returns, while still maintaining enough exposure to the better-performing assets? This way we ensure that the portfolio grows and keeps pace with inflation.

Portfolio 4 consists of 33% stocks 33% low grade bonds 33% real estate. Again we will run a simulation, first making withdrawals of 4% of the total and then another simulation making withdrawals that are the same amount adjusted for inflation.

Portfolio 4: 33% stocks, 33% low grade bonds, 33% real estate

Here is what that would look like withdrawing a steady 4% of the total portfolio value

Retirement portfolio 4a performance 2000 to 2020

And this is what that looks like when we make withdrawals that maintain purchasing power.

Retirement portfolio 4b performance 2000 to 2020

Well, this has improved the situation considerably.

In the first instance when you are just withdrawing 4% of the total value each year, you still experience some down years but the drop in purchasing power, in 2009 for example isn’t as significant as the drop experienced for the other portfolios.

What’s more, with the withdrawals maintained at constant purchasing power, the total portfolio value is over $4.6 million after 20 years. In all probability we would have decided to live it up a little and start withdrawing more, maybe just adopted the 4% rule.

Something else this is a testament to is the value of adding real estate to a portfolio as another source of returns that are not closely correlated with the stock market.

Improving the odds

A legitimate question could be, how else could you improve your odds of better returns on a retirement portfolio? I would answer that question with two suggestions.

The first is to pay attention to the sectors that are outperforming other sectors and the market. This article explains how investing in sectors rather than just the whole market can improve the performance of a portfolio of stocks.

Another way to improve performance and importantly reduce the variance of returns is to pay attention to style factors. This article explains how to build style factors into your investing approach.

Seek advice

In the case of our retiring couple, there could be good reasons why they would want to maintain their purchasing power year on year. Alternatively, there could equally well be compelling reasons why preserving their capital is paramount so they would stick to the 4% withdrawals rule.

The simple fact is that all of our situations are different. There will be different tax implications of different approaches depending on our circumstances. Health, life expectancy, and a desire to leave a legacy are also factors.

Few of us are honestly emotionally equipped to deal with such thorny issues as how long we would be expected to live and make adjustments to our own financial plan to suit.

For the complex task of retirement planning, we should not be shy to reach out and seek expert advice. This article explains some of the facets of seeking financial planning advice.

Questions and answers

Q. What is the safest investment for retirees?

A. There is no such thing as a single safest investment for retirees. As this article has demonstrated you need a diversified portfolio of liquid assets with high expected returns whose returns are not correlated. The worse thing that can happen in retirement, financially speaking is to run out of money. With current interest rates so low, the traditionally safe investments of Treasury bonds will not keep pace with inflation.

Q. What is the best asset allocation for retirement?

A. This article has demonstrated that an approximately even allocation across the different classes of stocks, high return bonds, and real estate delivers good results. I refer back to our table of annual returns for each asset class above.

We could probably do some fancy mathematics that would derive an optimal asset allocation based on either the last 20 years or 30 years or different periods depending on whether we wanted to maintain purchasing power or preserve capital as our primary goal.

Or if we could convince ourselves that the expected returns and variance of returns of each class are more or less stable, we could use those statistical figures to derive optimal allocations. However, as is always the case though, past performance is not necessarily an indication of how assets will perform in the future. So it is best to stick with a system that is rational and can be easily managed.

Q. How much do I need to retire?

A. Using this total portfolio approach, you need to retire on an income of approximately 80% of your last salary. If you withdraw 4% per year to retire, you can calculate the total amount you need to retire as equal to your last salary multiplied by 0.8 and divided by 0.04. That is the same as 20 times your last salary.

So if you earned $100,000 you will need a sum of $2 million to retire if that is your only source of income.

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Single-page summary

Here is a single-page PDF summary of the best investment strategy for retirement.

Best investment strategy for retirement summary

I hope you found this article interesting and useful. Do leave me a comment, a question, an opinion, or a suggestion and I will reply soonest. And if you are inclined to do me a favor, scroll down a bit and click on one of the social media buttons, and share it with your friends. They may just thank you for it.

Disclaimer: I am not a financial professional. All the information on this website and in this article is for information purposes only and should not be taken as personalized investment advice, good or bad. You should check with your financial advisor before making any investment decisions to ensure they are suitable for you.

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  1. Thank you very much for sharing such valuable information. I am not a financial specialist, but I recognise how important it is to take into account as many variables as possible to make our best financial plan. How crucial it is to have a global perspective of all possibilities and to be aware of how important it is to be well informed. I really like the way you have approached the financial analysis giving a very clear reasoning of each result obtained. Thank you again for this very exhaustive article.

    • Hi Martha
      Thanks for the comment and positive feedback. I am glad you found the article interesting and I hope useful. I think one thing we would all hope that we are able to take the global perspective into account in the planning of our financial future into our retirement years. The last thing we will want to be doing in retirement is trying to steer our financial ship through choppy and treacherous economic waters. So yes, the importance of planning is paramount.
      Best regards

  2. Thanks for the valuable information. You gave a lot of food for thought. I think if you keep in mind the basic advice of not putting all your eggs into one basic, is a good approach. I think your examples have proven that…it seems best to be equally split between bonds, stocks and real estate if possible. I admit I don’t have bonds, but I have stock and real estate investments. I will definitely do my research on bonds…thanks for the tip!

    • Hi Yvette
      Thanks for the positive comment. I was actually a little surprised by the result as I didn’t know how it would turn out until I actually ran the numbers. I was surprised at the impact of adding another asset class whose returns are not correlated either with stocks or with bonds. There are a lot of mistakes people can make with their retirement nest egg. It pays to really do your research, develop and plan and follow it through.
      Best regards

  3. Hi Andy, You shattered my pre-conception about income – producing stocks or bonds by saying not to go out of your way to find them. I thought that was the whole idea behind investing :-). Rather, you suggested by using a total portfolio approach, to focus on total returns to reduce volatility and ultimately risk.
    Thanks for providing some guidance which certainly helps put you in the “drivers seat” when conversing with a Financial Advisor. Nobody wants to mismanage their retirement savings

    • Hi Ceci
      I understand your reaction. I do think one thing is clear though that the way central banks around the world have responded to the economic situation caused by pandemic-related job and business losses is to prop up currencies with massive influxes of government debt and to keep interest rates at historic lows. This inevitably means interest rates and hence income-producing assets that are tied to interest rates are unlikely to keep pace with inflation at least for the next few years. This is a view shared by a very large majority of central bankers and financial experts. So a total portfolio approach is the only way to preserve your capital and have a comfortable retirement.
      Thanks for your comment and I wish you the best of luck
      Kind regards

  4. Hi Andy,

    Thankfully, I am not close to retirement age (38). But, thinking about what we are going to do after retirement is important, even now. I work for a gig company and have worked for other big companies so I am part of their pension schemes, but I agree with you that we can do more after retirement to not only help ourselves, but to help others too.

    Real estate looks like one of the best investments for me. I have a few friends who have invested in real estate. We call it property here in the UK and they are always telling me that it is something I should do now, not wait until retirement.

    I am hoping that the business I am building by the time I retire will be enough for me to retire. But, if I do decide to invest in other things, then real estate is winning at the moment.

    Keep coming with these retirement planning posts because they are important for so many people.

    Thank you for sharing and keep up the great work.

    All the best,


    • Hi Tom
      I have to really think hard to remember where I was and what I was doing when I was 38 . . . 🙂 Like you, I have worked in large organizations so I have some small and one large pension coming from that employment so fortunately for me I don’t have to worry too much about building a nest egg. Actually, at 38 I was running my own small business making industrial videos. It was also a bit like gig work except I was bidding for projects and developing ideas and producing them. It was an exciting, living-by-the-seat-of-my-pants time and I did well over the 4 years I was doing that. But things change for various reasons.
      Good luck and thanks for the positive comments.
      Best regards

  5. Hi, Andy,

    Thank you for this thorough information.

    I don’t know about America but where I live, we aren’t educated about how to properly prepare financially for retirement so that we can have a decent life at this period.

    So this article of yours is really helpful. I guess I shall start with stocks and bonds, for the beginning.

    Do you have a recommendation of any specific investment platform suitable for beginners?

    I appreciate your feedback on this!


    • Hi Ionut
      Thanks for your comment. This article compares some of the major brokerage platforms but they all operate in the US and I think you have to be resident in the USA to be able to open an account with any of them. You would have to check what the local situation in your country is. If I am guessing correctly and you live in Romania there are a number of brokers that operate there. revolut, passfolio, saxo bank, etoro, and questrade are some that you could investigate. I would not know enough to recommend any of them. If your intention is to build an investment portfolio rather than rapid trading, I would make sure that the platform you choose is secure and only use multi-factor access to login into your account. The advantage of using a nationally recognized bank as a broker is that they would usually come with some form of deposit insurance. But as I say I don’t know enough about local conditions to make any recommendations.
      Good luck and best regards

  6. Hi Andy.
    Many thanks for running the numbers and providing the proof for the best retirement investment strategy over the last 20 years.
    I wonder if you ran the numbers using the same criteria over the previous 20-year blocks if the same strategy of an even split between bonds, real estate, and stocks with an annual withdrawal of 4% would always come out on top?

    The years from 2000 to 2020 have been unprecedented in terms of immediate and easy access to information globally and I imagine this has had an impact on the returns expected from specific market sectors. I can only see the ability to collect and assess information getting quicker and easier as time goes by.

    It’s important to have a good strategy for retirement as you say. However, I don’t think many people planned for a pandemic event that has affected all economies of the world at this time. I’m sure it is also not the last unforeseen event that we will be exposed to. These events make it more difficult to provide certainty in any strategy and also mean that the strategy that has worked best in the past may not necessarily be the best one for the future.

    Many thanks for taking the time to put all of this information together in an easy to understand format.

    • Hi Andrew
      I would be tempted to run the numbers for as many 20-year periods that I have on record. However, in the US the legislation that allowed the creation of REITs was only passed in 1960 and it took many years for the industry to mature and settle. The published data on REIT returns only goes back as far as 1972 so I suspect that the first 12 years were rocky times for them. But on a practical level, every variable you introduce multiplies the number of scenarios you have. I think when I come back to revise this I will do as you say and see how the performance varies over different periods.
      I looked at the returns of the S&P 500 over all the available 30-year periods in this article to see if there were any significant variations. Over all 30-year windows, the worst returns were around 6% annualized, and the best were around 12% annualized. In that case, I didn’t take the analysis any further and include other asset classes.
      As to whether the 4% rule always works best, I think the 20-year period I chose was probably one of the worst except for the period from 1929 and into the early 1930s. I do think it is likely that a slightly different mix of stocks, bonds, and real estate would have produced marginally better results. Maybe 40% stocks, 40% real estate, and 20% bonds. But then again, we can only run the numbers using past historical data so the future may be different.
      As regards the availability of information, yes there is so much so readily available that markets react more quickly instead of having to wait for the impact of the morning papers. In some sense, I would think that just serves to amplify volatility and accelerate reactions rather than change anything fundamental about what the market is doing.
      You are very right to say that most of us did not plan for the pandemic. Most of us except some prominent doctors and Bill Gates that is who have been warning about this for years. But one of the worst mistakes that can be made in investing is to complain about what is happening and say that it shouldn’t be happening. We have to play with the hand we are dealt.
      Thanks again for your positive comments, I am glad you found the article interesting.
      Best regards

  7. Hi Andy,
    You continue to astound me with your in depth articles. This one is brilliant. You cover all the asset classes and go in depth. I will share this as many people are walking on egg shells at the moment with their retirement funds and with covid. So much uncertainty about.

    For my own financial future I don’t actually plan on retiring. I love doing things and working online is so much fun. We are more into real estate than stocks and bonds although over the next few years will go deeper into them. Our plan is to pay off at least a couple of our investment properties and have a nice steady income from the rent. Like all things it has its ups and downs.

    Thanks again. Your posts rock!


    • Hi Kev
      Thanks for your comments. I understand from other friends in Australia that investing in real estate as an individual is very common and many people in Australia include this in their retirement investment plans. I am like you with regard to retiring. Even though my regular day job will come to an end some months from now I will continue working. For me, it will be a mixture of online work and possibly some consultancy and many other interesting activities.
      Thanks for your positive feedback and very best regards

  8. Hey Andy, thanks for sharing this post. I always like to learn about investing from your site as you always go in-depth and take care to explain everything down to the last detail. Just last weekend, I talked to my father and my older brother about preparing some sort of investment strategy for retirement. In my mind, diversification is the key. However, it’s a bit tougher to find out what eggs to put in which basket, which is why I like your site as I always get some awesome ideas. I like the idea of real-estate. I would prefer to have a majority of my retirement portfolio invested in real-estate. However, after reading your post, I now have a few more good ideas. This is a long read indeed. I’ll definitely come back to it a few more times to read it more thoroughly. Thanks again for sharing and keep up the great work with your site!

    • Hi Ivan
      Thanks for your comments. I must admit I was quite surprised just how significant the impact of diversifying into asset classes whose expected returns are also good but not correlated with other asset classes in your portfolio. There is also a strong argument that can be made for international equities on the same basis because they don’t track US market indexes as closely as US stocks do. Of course, everyone will have to sort this out for themselves depending on where they live and their circumstances, but the same principles apply.
      Thanks again and best regards

  9. Hi Andy, there’s a lot of information in this post and I am sure very valuable but my days of investing are long in the past.

    Too many people I know who invested in their younger days for early retirement got screwed and are still working today, due to real bad investments by so-called experts.

    I have always said that the financial markets are rigged and controlled by very well known people and I guess the reason why I decided to not tie my money up.

    These crashes happen pretty regularly and wouldn’t take too much for your investment to disappear.

    We all buy houses with the hopes that we are going to make a good profit when we sell, but even they are not secure and all it takes is a financial crash and we are screwed.

    What we are seeing nowadays are big investors in the crypto industry and making a killing.

    What are your views on Bitcoin and is it something you would consider investing in or maybe you already have.

    With this industry so volatile, you have to be on the ball and get out before the big-boys sell.

    Once again, thank you for sharing this valuable information.

    • Hi Mick
      I also lost a great deal of money from bad investments made on bad advice many years ago. Maybe many of us are prone to that kind of thing when we set out.
      As regards who controls or drives the markets, it is true that roughly 90% of the trading volume on the stock markets is from large institutions. These large institutions are run by professionals who study the markets all the time, both have and manage very large sums of money, and have access to the best information faster than the rest of us. So yes, this is a situation that is stacked in the favor of the institutions and against the little guy. However, because the big institutions have so much money to move around when they do decide to move their money they cannot do it all at once without causing massive price moves. It also means they often have too much money to invest in small individual stocks and are obliged to invest in sector ETFs. Also, their own published strategies that they are obliged to follow often require that they stay 90 or 95% invested in the markets so they don’t have the option to pull everything out into cash.
      All this means that when the big guys and girls make moves from one sector to another you can see the impact on the price action and on the trading volume. So the logical thing to do is follow where the big money goes.
      Yes, cryptocurrencies have seen huge surges in value, particularly some of the big names like Bitcoin and Ethereum and much of that is because institutions and big investors are steadily buying in and supply is limited. I think while it is likely those currencies will continue to rise there will still be huge swings in volatility and many people will be shaken out.
      I took a very small position in Bitcoin a couple of years ago and it is doing extremely well. I may gradually add some more. For myself, I would likely hold for at least two to three years to let it reach new territory. But I would always look at it as purely a speculative gamble. That doesn’t apply to blockchain technology though which I think is worth investing in as a long-term play. For myself, I would look at ETFs specializing in blockchain technology rather than try to pick an individual company stock.
      Thanks for your comments.
      Best regards

  10. Hey Andy, Great article. I love your approach to diversifying the portfolio. I think to have as you say your nest egg spread in several baskets there is a higher chance of having the income even if one asset, for example, stocks is not performing. I think this is really crucial for everyone to understand. What I did not see in your article were the EFT’s. What is your opinion about them?
    Thanks again.

    • Hi Julius
      Thanks for the question, I should have clarified in the article. Most typically when I say a stock portfolio, I would be looking at a few low-cost index-tracking ETFs, say one that tracks large-cap stocks, like the S & P 500, another that tracks mid-cap stocks like the S&P 400, and another that tracks small-cap like the Russel 2000. The absolute easiest and most efficient way to build a market tracking stock portfolio is to buy ETFs that do it for you. I will add a clarifying point to the article.

  11. Thanks for sharing this, Andy. It was an interesting read and it is something that I am starting to think of even though I am only 19 years old. I think of my future and I don’t want to experience financial anxiety when I am older. What advice could you give a teenager in that situation? When do you think is a good time to start saving and investing and what is the best way for a complete beginner to learn?

  12. Thank you! This was a very informative post about retirement investing, I love your site in general and have bookmarked this site.

    Thank you for your work!


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