Types Of Investment Risks Elderly Individuals Must Be Aware Of
For anyone who is 65 years or older, having an investment is the surest way to attain financial freedom. Whether you have just retired and you are planning to invest your savings, or you have been in retirement for a while and you now want to venture into business, it is important that you understand the most common types of investment risks. The moment you decide to invest, you should know that you become exposed to various types of risks. Learning how these risks can affect your returns is important. Some of these investment risks include:
- Longevity risk
Longevity risk is the risk of you outliving your savings. Longevity risk is relevant particularly for individuals who are about to retire or those who are retired. You can never tell how long you will live after you are retired. This also means that you cannot be certain how much money will be enough to take you through the rest of your life. It is therefore very important to continue saving and investing even during your old age.
- Credit risk
This is the risk that a certain company or government entity that issues the bond might run into deep financial difficulties and might not be in a position to repay the principal or pay the interests at maturity. This risk is particularly relevant to bonds and other debt investments. To be safe, you should evaluate the credit risk of a company. You can do this by checking at the bond’s credit rating.
- Concentration risk
This is the investment risk of loss when you concentrate your money in one type of investment or in one investment. To mitigate this risk, get 2020 medicare supplements @ https://www.medicaresupplementplans2020.com/ you can diversify your investments. This will help in spreading the risk over various types of industries, geographical locations, and different investments. In other words, don’t put all your money in one type of investment.
- Inflation risk
Inflation risk refers to the loss or reduction in your purchasing power for the reason that your investment value doesn’t keep up with the rate of inflation. Inflation risk is relevant especially if you own debt or cash investments such as bonds. Real estate usually offers some level of protection against inflation because as the landlord, you can increase the rents of your property over time. Shares also offer some level of protection because companies can charge their customers more in line with the rate of inflation.