Assume our typical 65-year-old investor likewise has adequate insurance coverage and a cash reserve. Let's also assume she is retiring this year. This individual will want less risk exposure than the 25-year-old investor, because her earning power from employment will soon be ending; she will not be able to recover any investment losses by saving more out of her paycheck. Depending on her income from social security and a pension plan, she may need some current income from her retirement portfolio to meet living expenses. Given that she can be expected to live an average of another 20 years, she will need protection against inflation. A risk-averse investor will choose:

Question

Quizplus · Accepted Answer

A risk-averse investor who is retiring soon and needs protection against inflation will want a combination of current income and capital preservation strategy. This means that the investor will want investments that provide regular income (such as bonds, dividend-paying stocks, or real estate investment trusts) while also protecting the principal value of the investment (such as high-quality bonds, cash equivalents, or low-risk stocks). The focus should be on preserving the value of the portfolio and generating income, rather than trying to achieve capital appreciation or total return.

Assume Our Typical 65-Year-Old Investor Likewise Has Adequate Insurance Coverage