You would like to retire in 10 years. You have been a conservative investor in y

Question

You would like to retire in 10 years. You have been a conservative investor in your 401K fund over the past 25 years and your retirement fund has fallen behind and 10 years may not be enough time to build a comfortable retirement fund given your current strategy. You have studied the current economy and now must choose whether you invest in bonds, stocks, or a combination to help you reach your goal. Develop and justify your 10 year strategy based on the pros and cons that an investor should consider when considering investing in Bonds versus Stocks or both. Answer in the space below, or in an attached Word document. Limit this to 500 words or less.

Explanation / Answer

To Invest In Bonds
People have a common mis-conception that investing in bonds is safe. But this is not the case. Investing in Bonds have fewer risks than investing in stocks. The Bonds give a systematic inflow of money excluding the case that the bonds are callable. As the inflows are sure so the average amount of rate of return is less in bonds. A person must consider investing in bonds when there is no sure inflow of money from any other source or he is not willing to take any risk i.e. he is risk averse.

To Invest in stocks
Investment in stock is highly unlikely when the investor is not willing to take risk. That is an old person who doesn%u2019t have a constant source of income would like to invest in bonds rather than stocks because atleast it would give a steady source of income without much risk.

In the early part of 10 years a person must diversify his portfolio well,investing a part in bonds and part in stocks.But later after 3-5 years he must entirely shift to investing in bonds,because that would atleast provide him a source of constant income without any additional risk

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