Life annuities and the tradeoffs between investment returns and risk

By | September 19, 2009

As you are making personal finance decisions and decisions about your retirement, families should consider the fact that, in the past, conservative investments have yielded significantly lower investment portfolio returns than an investment portfolio with greater risk has returned.

With returns adjusted for risk, an individual just cannot get better returns without exposure to higher risk. If you take on greater asset portfolio risk, you may be able to consume more and invest not as much, due to the fact that the investment return on such an investment portfolio historically has been more rapid than a lower risk investment asset portfolio. However, you should realize that the expected results of this strategy are less certain.

Conversely, when individuals undertake lower investing risk, you need to anticipate the need to save more and to invest more. Yet, the outcome is more likely to be more certain. How to strike a personally appropriate balance between investing risk and return is a combination of art and science. However, this is not easy, because the future is fundamentally unknowable, until it arrives.

An individual must carefully decide on their financial investment strategy conforming with their risk preferences.

Anyone may analyze these tradeoffs by experimenting with various settings with a sophisticated personal finance application. With historical asset return data, a sophisticated personal finance application with asset value projection functionality will soon become clear that a selection of investment assets that is focused on cash and bond assets will more likely tend to appreciate at a slower rate than a portfolio favoring stock investments.

Long-term success with a conservatively invested portfolio depends much more on sustained high rates of saving rather than on greater hoped for investment returns. This necessitates greater adherence to a savings program to sustain over the years and across one’s lifetime. Conversely, stock heavy asset portfolios require greater investment portfolio capital gains. Neverthess, these stock focused strategies will also require significant savings — however at lower levels than a more conservative investing approach.

A comprehensive and automated lifetime planner with a personal finance program is necessary to produce a much more reasonable lifetime financial plan

To generate a very high quality family financial strategy depends upon you using the best personal finance software with the top investing calculator and the leading financial planning software program. Look here to choose the top all-in-one financial planning tool home computer application with superior financial planning for retirement software, the top home budget planner, and high quality investment planning software for your personally customized lifelong family financial planning efforts.

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