How to select the right investment product for retirement income - Economic Times | Canada News Media
Connect with us

Investment

How to select the right investment product for retirement income – Economic Times

Published

 on


Ishaan has recently retired from service. He has accumulated a good retirement corpus and now needs decide on how to invest it. He has been hearing about the returns people have made in crypto and gold and real estate as an asset appeals to him. He has also been seeing advertisements of high return corporate bond issues and his relationship manager in the bank has been talking to him about mutual funds.

Ishaan is clear that safety of the investments is important since his earning years are over. While he is able to understand the features of products when they are explained to him, he is unable to decide whether it is suitable for his needs. He would like to simplify things in his mind so that the selection is easier.

Ishaan needs to get clarity on his needs at this stage to make the right product choice. The primary pegs to investing in retirement are income and flexibility. The investments that Ishaan selects must provide a periodic income that is adequate for his needs.

Moreover, he must know the amount and periodicity of the income to be able to plan his cash flows in a way that money is available when needed. Investments such as gold generate no income, while the return from investments in real estate and equity is more from capital appreciation. These investments may not generate income with the regularity and predictability that he will require in retirement.

Ishaan must evaluate products with different characteristics but with income as the primary return. Some products may come with guarantees, such as government guaranteed schemes and bank deposits but may have lower return and liquidity. Others such as bonds of companies may offer higher return but carry a slightly higher risk of default. Some may give market-linked returns but without the predictability essential for him to plan his cash flows.

The taxability of the income generated is another important feature that he must consider since the post-tax income is what will be available for consumption. The choice of investment and structuring the return should be done with the view to enhance post-tax returns.

The flexibility of the investment portfolio to respond to changing circumstances in retirement is an important factor in selecting investments. Flexibility may be in terms of the amount of income generated, how the income is paid out, the liquidity that can be generated, and transferability of the investments.

To ensure this, Ishaan must not tie up large sums of retirement funds into one or few investments. Instead, the retirement portfolio must hold a combination of investments which will give him the scope for re-organizing his portfolio as required. The retiral income must be drawn from multiple investments with diverse features so that he is able to balance the income with safety and flexibility in the retirement years.

Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.

Adblock test (Why?)



Source link

Continue Reading

Economy

Energy stocks help lift S&P/TSX composite, U.S. stock markets also up

Published

 on

 

TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.

The S&P/TSX composite index was up 34.91 points at 23,736.98.

In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.

The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.

The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.

The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.

This report by The Canadian Press was first published Sept. 17, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

S&P/TSX gains almost 100 points, U.S. markets also higher ahead of rate decision

Published

 on

 

TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.

“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.

In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.

The S&P/TSX composite index closed up 93.51 points at 23,568.65.

While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.

Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.

But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.

Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.

“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.

“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.

A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.

It would also be “counter to what they’ve signaled,” he said.

More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.

“That’s going to be more important than the size of the cut itself,” he said.

In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.

“Here, the labour situation is worse than what we see in the United States,” he said.

The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.

The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.

The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

Published

 on

 

TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending

Exit mobile version