Now, let’s turn to your other goal – retirement. When you are saving for retirement, your primary objective is pretty simple: to accumulate as much money as you can. Consequently, you will need a reasonable percentage of your portfolio devoted to growth-oriented investments. But what’s a reasonable percentage? There’s no one-size-fits-all solution – the amount of growth investments in your portfolio should be based on several factors, including your age, risk tolerance and projected retirement lifestyle.
Furthermore, this percentage may need to change over time. When you’re just starting out in your career, you may be able to afford to take on the greater risk that comes with having a higher percentage of your portfolio in growth investments. But as you get closer to retirement, you might want to begin shifting some dollars toward more conservative vehicles – you don’t want to be over-exposed to the volatility of the financial markets just when you need to start selling investments to help fund your retirement.
The examples of taking that extensive vacation and enjoying a long retirement illustrate the importance of recognizing that you will have many goals in life – and you’ll need to prioritize and plan for them, sometimes following significantly different investment strategies. When you do, you’ll give yourself a better chance of reaching your destinations.