Retirement funds must be carefully prepared. Some people may think that it's too early to start young, but they're wrong.
To build a retirement fund, saving is not enough. We need to develop a long-term investment strategy to achieve financial freedom in our late years.
Stocks are one of the right investment instruments to prepare for retirement. However, there are some things that need to be considered in practice.
Understand the Characteristics of Stock Investment
Stocks generally offer the potential for higher returns and come with high price fluctuations. Therefore, one should be prepared for the ups and downs of the market during long-term investing.
Choose High-Quality Stocks
Prioritize blue chip stocks with stable performance and long-term growth potential. Stocks that regularly pay dividends can also be an option to increase passive income. Diversify your portfolio into several sectors to control risk.
Set Targets
Once you know the potential growth of your investment portfolio, calculate how much you want to invest based on your lifestyle, target retirement age, and annual inflation rate. That way, we can figure out our monthly investment needs.
DCA Method & Dividend Reinvestment
Regularly purchasing stocks at a set amount (dollar-cost averaging aka DCA) can improve consistency and discipline in investing. We can reduce the risk of market timing by reducing the average cost per share. Dividend reinvestment can also be done when the stock price is down to optimize future returns.
Portfolio Evaluation
Check stock performance every 6-12 months and adjust your strategy if necessary. As you get closer to retirement age, slowly shift some funds to more stable and less risky instruments such as bonds or fixed income mutual funds.
Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).
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