Retirement investment portfolios are used to create a balance between capital preservation for safety purposes as well as the growth of the capital that would protect it against inflation (Anderson et al., 2016). In a balanced retirement portfolio, there are two distinct characteristics, which include diversification and a fixed income. While diversification is intended for reducing the volatility of equity to its lowest degree, it also meets the total return necessary for funding withdrawals (Pfau, Tomlinson, & Vernon, 2016). A fixed income in a balanced portfolio is intended to provide a store of value to fund distributions and mitigate volatility.
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A similar model can be used in a personal retirement investment portfolio to combine a fixed income and diversification. The total return investment approach fits this purpose because it ensures that distributions are funded opportunistically from any part of the portfolio regardless of accounting for the income, dividends, gains, and losses, or interest. Achieving balance in an investment portfolio is important because of its potential to provide a stable income later on.
The article by Pfau et al. (2016) is useful for understanding different alternatives and finding desired combinations of product and asset allocations to facilitate a balanced retirement portfolio. Importantly, the researchers underlined that it was essential for a retired individual to utilize the available low-cost advice options to begin investing. It is necessary to note that research on retirement investment portfolios in scholarly literature is highly limited. There is a lack of insight in the article as to the basic advice that retiring individuals can use in their further actions, which should be addressed in future studies.
Anderson, D. R., Sweeney, D. J., Williams, T. A., Camm, J. D., Cochran, J. L., Fry, M. J., & Ohlmann, J. W. (2016). Quantitative methods for business (13th ed.). Boston, MA: Cengage Learning.
Pfau, W., Tomlinson, J., & Vernon, S. (2016). A portfolio approach to retirement income security. The Journal of Retirement, 4(2) 11-22.