Why ETFs are the ideal retirement investment option
Investing for a healthy financial future is important for all investors, young or old. Investing for an early retirement
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any people tend to look at long-term investing as something that they would want to consider or action ‘one day’, but the first step to a long-term strategy can be taken today. A new movement called the Financial Independence, Retire Early (FIRE) movement is well underway, as more and more people realise the value of long-term investing and taking charge of their financial futures. One of the challenges, however, is being able to make the right choices that not only grow your nest egg over time but also ensure you don’t pay too much in management fees while doing so.
The idea behind longterm investments The value of investing over the long term is often underestimated, as investors try to take advantage of shortterm fluctuations in sharemarkets. But the market often rewards those who have the ability and confidence to hold
on. Economic growth cycles of boom and bust can typically last anywhere from 2 to 5 years. So, you see, cycles of boom and bust tend to even out with positive trends over the long term – which the savvy investor can capitalise on.
Look for capital appreciation over the long-term For younger investors who are starting their investment journey with an eye towards their future, one of the most important things to aim for is capital appreciation. Over long periods, many studies have proven the value of investing in shares for generating wealth. BetaShares’ range of Funds includes equities ETFs that invest in a portfolio of shares and, in doing so, aim to produce capital appreciation over the long term.
The power of long-term investments Naturally, there are rises and falls in the market, but by maintaining a
focus on the goal of retiring early and having the patience to hold on for the long term, those with a distant investment horizon should have a better chance of meeting their objectives and seeing their investment grow, despite short-term fluctuations. Consider this: a 50-year-old investor could invest $1000 every month ($12,000 a year), into a low-cost, broad market ETF. If this ETF grows at a rate of 4 per cent annually, after 25 years that investment could be worth over $500,000, minus any fees or expenses. If you can afford a higher investment amount, you may be able to make it to retirement even faster.
Low-cost investments for the long run While returns are the main way you’ll reap the rewards of long-term investing, keeping fees to a minimum will also have a significant impact on your returns. ETFs are known not only for their simplicity and diversification, but also for being cost effective.
Simplifying ETFs – A comprehensive guide to ETFs and retirement investing
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