Investment Poser for Retirees

Case 1: Choong Mun Fook, 58, a retiree, intends to invest in unit trusts and investment-linked insurance using his savings. These investments now offer attractive opportunities as considerable value has emerged from the downward spiral in asset values.

He also plans to pick up some blue chips in the stock market which have been battered in terms of valuation. Although it is considered risky for his age, it is a good alternative over the medium term compared with FDs, which offer such low yields. The current market situation was a rare opportunity for investors to obtain better returns since the KL Composite Index had fallen by more than 40% since the beginning of last year.

Case 2: Grace Matthews, 62, a former civil servant, purchased unit trusts using her gratuity upon retirement. The unit trust market proved to be a profitable venture initially but her investments were badly affected last year. She also put some savings into the New Zealand and Australian foreign currency deposits but has made losses as well recently.

Her savings were now mainly placed in Amanah Saham Nasional Bhd’s fixed-priced equity-based unit trust funds namely Amanah Saham Wawasan 2020 and Amanah Saham Malaysia, which offer consistent average returns of about 7% yearly.

Case 3: Cheah Kay Eng, 78, believes that FDs still present the least amount of risk compared with other financial instruments in the market. Although they are not substantial, returns from FDs still give him a bit of pocket money every month.
From the above scenario, there are many choices but it depends on individual’s risk appetite. Higher returns come with higher risks compared with safe but low-yielding FDs.

However, the financial expert said the level of risk associated with financial products was relative. FDs and savings accounts in banks are no longer a sure bet, as Citibank, Lehman Brothers and Merrill Lynch either go bankrupt or bailed out by the government.

Additionally, many people had the wrong perception that savings entailed investing in just one particular product. The right way for a retiree would be to take a diversified approach to risk so that he is not too exposed to a particular risk sector. Then, he has to determine what is the combined risk taken and monitor the risk exposure over his investment time horizon so that it is reasonable to the returns he wishes to get.

Ideally, early financial planning would help retirees avoid the stress of dealing with insufficient retirement funds or seeking additional means to ensure financial stability. Plan ahead to counter the effects of inflation – many retirement plans are built with flexibility in mind, allowing you to decide and control how much to set aside each month.