How to Invest after Retirement

There is a common rule of thumb for investing in general that becomes even more important when investing after retirement. This is the 100 - age rule, which states that your stock and bonds portfolio should follow this rule where 100 - age is equal to your stock percentage while the rest is your bonds portfolio. Obviously, if you are an elderly above 60, this means that the majority of your portfolio will be in bonds.

For bonds, there are certain options available for you in Singapore. For one, the Singapore Savings Bond and the MAS T-Bills are great almost zero-risk bonds which provide a good rate of return on your money. They are liquid, which means you can redeem them at any time and the principal is secured. However, the downside is that they will rarely beat the prevailing inflation rate.

I will also highly recommend against buying individual corporate bonds because, despite their good returns of 4% and above, they have a higher risk of default. This is shown in cases like Hyflux which defaulted on its retail bond and caused investors to lose even their principal in some cases.

In addition, I will recommend buying a index fund if you have a longer term time horizon of 5-10 years. This would mean the Straits Times Index, or STI SPDR etf or the S&P500 United States Index fund SPY. This is because the stock market usually goes up in the long term, and that the stock market is usually green 70% of the time barring any black swan events.

I would also recommend fixed deposits for a safe and worry-free method of earning passive income. The Stashaway Simple Guaranteed fixed deposit gives 3.6% per annum for 6 months and the CIMB fixed deposit gives 3.55% for 9 months.

If you want, you can consider high interest savings accounts like the CIMB FastSaver or the Trust Savings account. There is no risk of default for these banks savings accounts as they are fully insured by SDIC for 75k even if the bank goes under. The cons however, is that bank savings accounts almost never beat the prevailing inflation rate.

I would also recommend retirees to stay away from individual stocks as retail investors usually underperform the market average anyway. So the best way, if you want to be invested in equities, is in a stock market index.

That’s the end of this week’s update. I hope you enjoyed this email newsletter and stay tuned for more next week.

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