How to Build the Best Retirement Investment Portfolio for You

Daniel Penzing
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The sooner you start building your nest egg, the better. Follow these tips on how to prepare for retirement.

The Money Planning for Retirement Nook covers topics like asset allocation, investing, retirement, tax planning, and Social Security. The information is presented in a way that gives a basic understanding for the idea, as well as some practical advice on how to apply them. I found it a very helpful resource and recommend it to anyone planning for their retirement.

This guide creates a profile for you, based on your input, and then helps you calculate how much money you need to retire, how much money you have today, and how much money you need to invest. Then it helps you create a specific plan, including reviewing your current investments, recommending changes, and showing you exactly what to do next.

How to Develop a Retirement Investment Strategy for Yourself

You should have a clear idea about what you want to achieve in the future. You should also have a clear idea about how much you’ve got to invest for the future.

Investing for your retirement doesn’t have to be hard. It doesn’t have to feel like a chore. If you have a clear vision of where you want to go and how to get there, the process becomes a lot smoother. Think about the following items before you start investing.

Does your investment strategy need to change?

For a beginner, the outlook can seem quite bleak. It is always a good idea to evaluate the overall performance of your portfolio at least twice a year.

Rising oil prices, a strong dollar, or budget cuts might not be the kind of things that people like to hear about. A 50% decline in the Nasdaq a couple of years ago left millions of investors devastated. Nevertheless, crashing markets is an integral part of investing so you need to understand how to make profits during the upturns as well as during the downturns.

If you’re a novice investor, it is always a good idea to get help from someone who has more experience in this field. A senior financial advisor can be the best friend when it comes to helping you with charting out your investment strategy.

Types of Investments

There are three types of investments… stocks, bonds, and cash equivalents. Each one falls into a distinct class and provides a specific type of risk and return. You will want to diversify your portfolio because each of these asset classes naturally has its own risk and potential for return. Having a diversified portfolio is an ideal way to minimize downside risk while maximizing upside potential.

Cash Equivalents

Cash equivalents are the most liquid, stable, and least risky of the three types of investments. They usually include money market products, savings accounts, and certificates of deposit. The goal of investing in cash equivalents is to preserve your purchasing power. The most common mistake with cash equivalents is keeping so much in cash that you miss out on appropriate opportunities. But keep in mind that the tradeoff is safety for the opportunity cost of investing your money elsewhere.


Stocks are the largest class of investments and provide the opportunity for significant upside with higher risk in exchange for that opportunity. Stocks are pieces of a company owned by shareholders. If the company is successful, shareholders receive a return on their investment in the form of dividends.


Bonds are fixed-income securities that are issued by corporations, governments and municipalities to raise capital. There are many different styles of bonds. They are typically considered less risky than stocks, but they offer a lower rate of return.

Risk vs. Return


Vs. Bonds

Stocks and Bonds are vehicles that give investors participation in businesses. Stocks are a part ownership in a company and Bonds are an IOU from a business. Stocks and Bonds each have pros and cons, but both can be a great retirement investment for an investor. Let’s take a look at the differences and then we will talk about the best investment portfolio for you.

Since there are many companies offering Stocks, the first step in picking the best investment is to screen for companies that can give you a return you like. You need to screen several companies and then narrow that down to a few that you like. You also need to look at the market to make sure it is a good time to buy this stock. If the company is doing well and you can get a good price why go through all the trouble!

Investing in Bonds is a little more straight forward, just find the company or government that is offering the most interest. Now even though it is easier, the interest rates might not find as high as you want. Investing in Bonds can be a good way to diversify your portfolio, but it may not pay off the way Stocks do.


Although bonds can be a relatively safe investment, there are a number of bonds that are considered high-risk because interest rates are fixed. If interest rates go up, these bonds can drop in value. If interest rates are unchanged, these bonds won’t do much for you, either. Some bonds, however, are considered safer than others. These include U.S. Treasury bonds, which are backed by the full faith and credit of the government. These bonds have increases in value whenever interest rates go up and are relatively safe in times of economic downturns, and they eliminate the risk of making losses, as well as interest rate risk.

In comparison, corporate bonds aren’t as safe. As the name suggests, they are issued by companies and therefore aren’t as likely to be backed by the entire government. Although they still have a low-risk profile, they do have some default risk. Also, if the company you invest in suddenly defaults, you can lose your entire investment. Even if the company doesn’t default, two-year corporate bonds with fixed interest rates can be more risky than U.S. Treasuries because if interest rates don’t increase, you won’t be able to make your principal back.


One of the best retirement tools out there for maximum protection on your retirement investment portfolio, the whole purpose of an annuity is to generate monthly income. There are different types of annuities that you might choose from, let’s look at a couple of the most prominent ones below.

Fixed Amortizing Annuity: Many people naturally think about making sure that they want guaranteed income in their retirement. This is a great annuity option for people who want income protection and guarantee. The interest rates in this annuity are fixed, protecting you from market fluctuations. Another possible benefit is that the fixed payments will last until you start taking income from the annuity, so if your life expectancy is in your older years, the annuity may be a good choice.

Variable Annuity: While some people enjoy the protection that comes with a fixed annuity, others love the competitive interest rates that come with a variable annuity. If you’re not that concerned about guaranteed income, you may wish to choose your own investments. A variable annuity will “lock” the rate that you invest at, however, you will then get a guaranteed rate of return. This is an ideal option for those who feel that they have a good eye for investment opportunities.

Real Estate

Retirement years are not just for relaxing, it is also a period for investing in the future. You can build your retirement portfolio with a diverse set of investments like real estate options, stock, and bonds. While real estate is still a good investment option going by the recent decade, it possesses risk and it should not be the most relied upon investment option.

Pros – You can build equity by sinking money into a rental, duplex, or triplex. You can charge rent to tenants, and you can also charge off for expenses and repairs. When you sell the property later, you can earn a great return on your investment. This is especially true if you hold properties for at least two to four years.

Cons – Unlike stocks and bonds, real estate is hard to liquidate. If you need to pull out your money, you need to find buyers for your property, and you’ll likely lose money from the sale transaction.


Cash is king. It is the foundation of any investment portfolio, the place to start when you are making your asset allocation plan. As a general rule, you want to have plenty of cash readily on hand in case unforeseen events get in the way of your long term investment plan.

You don’t want to find yourself thinking that you need to sell stocks to raise cash; rather, you want to have cash on hand to take advantage of market downturns or events beyond your control.

Certificates of Deposit: A Certificate of Deposit (CD) is a bank product that you can put your money into for a predetermined length of time in exchange for a higher interest rate of return than you could normally get on other bank products.

A Certificate of Deposit (CD) is a bank product that you can put your money into for a predetermined length of time in exchange for a higher interest rate of return than you could normally get on other bank products. Money Market Accounts: A money market account can be thought of as a bank account that earns interest but has a cap of how much interest your money can earn.

A money market account can be thought of as a bank account that earns interest but has a cap of how much interest your money can earn. U.S. Treasury: U.S. Treasury bills are a safe and secure way of investing your capital and getting a guaranteed interest payment.

Your Best Retirement Portfolio

Most times, people don’t put much thought into their retirement portfolios when they start investing because they want the investments to “just happen”. However, the case is not like that because if you don’t pay attention to your current investments, you may end up spending longer to retire than you intended.

If you are close now to retirement age and you are seeking advice on right retirement investments for you, the first step you should do is to work out your investment goals. While you can continue to work and do the investments as long as you are healthy, you would want to avoid running out of money before you kick the bucket.

This means that your retirement portfolio needs to be tailored to ensure finances are available while you are working at the same time ensure you will still have a nice nest egg after you retire.

The first thing you need to do is adjust your desired annual retirement income. You need to remember that as you head down the years, the interest earned on your investments may not cover the predicted inflation rate. This means you need to adjust your expectations to align with inflation.