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Investing for retirement: How to build a strong income portfolio

by , 20 June 2014

Arguably, one of the best ways to prepare for retirement is to have a few different means at your disposal. This gives you some diversification and reduces your risks if something untoward was to happen to one of your plans. For instance, you may have a retirement annuity, a pension scheme through your job and a bumper savings account. And if you haven't thought about it before, you can put some money to work in the stock market for your retirement. So what's the best way to do that? Let's take a closer look…

Stock market investing for retirement

If you have a pension fund, chances are a large chunk of your money in that fund is already working for you in the stock market. And you can also take this route to build a strong, income producing portfolio for your later years.

So what’s the best way to go about this?

As you’re thinking about your retirement, the most important factor is safety, Marc Lichtenfeld in Investment U explains. This means you want to focus on some of the stock market’s less riskier offerings.

One great way to do this is to invest in shares that are in solid companies that pay dividends. And you’re not just looking for any dividend paying company, you’re looking for a company that maintains and increases its dividend payments.

You can sit back and watch you money snowball with the effect of compounding

And what’s great about investing in these sorts of shares is that whilst you don’t need the income, you can put it to work. You can reinvest your dividend payments to buy more shares with. This grows your investment over time, which results in more dividend payments over time too.

This strategy is a great way to benefit from the stock market’s conservative shares. And with the power of compounding at work, you’ll be amazed at the growth of your investment over the years.

Equally so, instead of reinvesting your dividends, you could opt to put the money aside to invest in other strong dividend paying shares over the years.

So there you have it, how to build a strong income portfolio for retirement.

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Investing for retirement: How to build a strong income portfolio
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