Your options when investing your pension

Know the best way to invest your pension by simply knowing your options.

18:24 15 January 2013

Investing your pension isn’t a walk in the park. There’s enormous information you need to know in order to make well-informed decision and in order to ensure that you’ll get maximum return of investment.

Below are your options when investing your pension:

Cash

This is the least risky asset class as investors are guaranteed interest (which can be very small compare to other investments) on top of their investment. Although there is no risk that you’ll lose money along the way, the capital is at risk from the effects of inflation. As prices are going up every year, the money you invested will most likely to decrease its buying power when you retire. This option is best for those people who are about to retire or are already retired and cannot afford to take too much risk.

Fixed-Interest Bonds

In a nutshell, this is a loan to the bond issuer. Investors are basically lending money to bond issuer; this could be the government or private companies. Bonds, just like cash, are generally safe however, the potential for growth is very limited. People who are approaching retirement will find this one very appealing.

Property

If you have several more years before you hit retirement, you can invest some of your money on property. Although this is considered risky compared to fix-interest bonds and cash, the potential for growth is generally higher. Property funds own a portfolio of properties, which are rented to tenants. Investors earn when the value of the properties increased.

Shares

Of all the assets type, shares are considered the most risky as shares’ value can rise and fall very quickly. This is recommended for those people who are looking into long-term investing.