8 ideas to diversify your assets in preparation for retirement
How can I diversify my assets ahead of retirement, besides pension funds?
While retirement is often associated with new opportunities, it also implies, for many, a significant decrease in purchasing power. Indeed, the two cornerstones of pension provision, AVS and the second pillar, only represent about 60% of the final gross salary. Don’t fret, solutions exist to enable you to apprehend this stage of your life serenely and to enjoy it to the full. For optimised financial planning, it's preferable not to put all your eggs in one basket. So how can you diversify your assets with retirement in mind? What saving and investment strategy should deploy? Whether you're seeking security, returns, or liquidity, at Piguet Galland, we stay by your side to anticipate your retirement starting now, regardless of your age.
Why diversify your assets ?
The objective of diversifying one's assets is to reduce the overall risk of investments by avoiding dependence on a single market or a single source of income. This strategy proves effective in limiting fluctuations and ensuring greater stability in investments. Indeed, if one asset loses value, it can be offset by another that gains. Thus, it helps to limit potential losses and increase the chances of achieving long-term gains.
Diversifying one's assets also offers greater flexibility to address economic, social, and fiscal changes that may affect the profitability of investments. Taking potential inflation into account, it may be wise to invest in tangible assets that retain their real value, such as gold or real estate. However, when a decrease in interest rates is looming, investing in more dynamic assets such as stocks or investment certificates and funds presents greater growth potential.
How can you diversify your assets?
To achieve your goals, ,when preparing for retirement, your asset diversification strategy must be fully adapted to your situation and your objectives. Here are some examples to consider when defining your investment strategy:
- Your personal situation: age, family context, income level, existing assets, etc.
- Your financial and personal objectives: financing a project, maintaining a standard of living, estate planning, etc.
- Your investment horizon: the length of time over which you expect your assets to grow;
- Your risk profile: ability to withstand market fluctuations.
Nonetheless, there are a few general principles that should be observed to ensure that your asset allocation is suitable :
- spread your investment portfolio over 3 or even 4 asset classes, with no more than 25% to 30% in each, to maintain adequate diversification that won't have a disproportionate impact on your returns. Choose assets with little correlation between them, so that they don’t move in the same direction at the same time.;
- reassess your asset allocation on a regular basis: your life evolves, as do your needs, and so does the market.
At the private bank Piguet Galland, our specialised advisors will be happy to guide you towards the investment strategy best suited to your retirement plans.
8 ways to diversify your assets for your future retirement
There are numerous solutions, each corresponding to specific investment needs and profiles. That's why we explore 8 efficient solutions in more detail, to guide you in your choices.
Pensions
Pension solutions enable direct investment for retirement purposes. There are two main types of 3a pension plans :
- The 3a pension savings account: an individual savings account that offers attractive tax benefits, as well as annual interest rate higher than traditional savings accounts.
- The 3a pension investment account: a variant where capital is invested in the form of units in investment funds. It aims to optimise returns in the medium and long term and provides the same tax benefits as the 3a savings account.
The pension buyback option is also an interesting choice for those who want to increase their investments in pension provision. Generally, a pension fund provides the collective management of pension assets. Therefore, you may not be able to define your own investment profile, and the return on investment offered will depend on pension management decisions.
Contributions to pension provision benefit from tax incentives. Additional contributions reduce your taxable income, and Swiss wealth tax will not apply as long as the assets remain within a pension plan.
We offer to accompany you in defining your investment choices in pension provision, so that you can opt for the best solution depending on your needs.
Investment funds
Investment funds are collective investment vehicles which pool the capital of several investors and invest it in different types of assets in line with a pre-defined strategy.
A wide variety of investment funds are available, reflecting :
- The nature of the underlying assets: equities, bonds, real estate, etc. ;
- Sectors: technology, industry, healthcare, etc. ;
- Styles: growth, high dividend, small and mid-caps
- Level of risk: cautious, balanced, dynamic
For some years now, it has also been possible to invest in “sustainable finance” funds and choose from ethical or green investments.
Precious metals
Precious metals are also tangible assets. The stars of cautious portfolios, they offer protection against inflation, financial crises, and geopolitical risks. Investing in precious metals reduces exposure to stock market fluctuations and offers attractive long-term growth potential.
Bonds
True pillars of a diversified portfolio, bonds represent debts owed by companies or governments. In exchange for subscription, they pay their creditors fixed interest at maturity. Like stocks, bond prices are traded on the stock exchange. Thus, their prices fluctuate, but to a much lesser extent, ensuring greater stability of the invested assets.
Real-estate
Investing in real estate means putting your money into a tangible asset that provides a steady source of income and protection against inflation. In a low-interest-rate environment, real estate offers attractive opportunities for returns. You can purchase a property for personal use or for rental purposes, known as buy to let. This enables you to receive rental income and consider selling the property for a profit in the future.
Shares
Shares represent a stake in a company's capital, offering the opportunity to benefit from its performance. Investing in equities enables you to receive dividends and take advantage of market growth opportunities to generate profits. Equities are volatile financial instruments traded on the stock market, and are highly effective for boosting a portfolio.
Certificates
Certificates or baskets of stocks are financial products that combine diversification and liquidity while reducing brokerage fees. Indeed, the cost of constructing an equivalent basket by buying individual securities is significantly higher due to brokerage fees and taxes. By opting for certificates, you can make your portfolio more dynamic while spreading risks across a large number of companies.
Cryptocurrencies
These are digital assets that operate using blockchain technology. To invest in cryptocurrencies, several options exist: buying directly on specialised platforms or via your bank. Cryptocurrencies present significant risks, such as volatility, a lack of regulation, security, and taxation. They are reserved for investors with a serious appetite for risk.
To sum it up, you've seen that there are many ways to diversify your wealth for retirement. However, they all require a serious, in-depth analysis of your situation and your objectives. That's why your private bank remains by your side to guide you for your serenity.
Assessing your pension
Will you be able to maintain your living standard when you retire? What happens if something happens to you? Are your loved ones protected? Carry out a pension assessment to take control of your future and protect your household.
