Many people think about delaying investing because they are young or not ready to start. In fact, investing from a young age will actually help someone to becoming financially literate from an early age. There are many choices of investment instruments that are suitable for all ages, one of which is the type of Bond.
Bond investment includes an asset management strategy that you can apply now to prepare for the future. That way, you can enjoy retirement without worrying about financial problems.
Overview of Asset Allocation in Investment
In investing, it is important to know the allocation of assets. This asset, if put into analogy, is like a treasure which form can adjust to the type of instrument owned. Here are some important things about asset allocation that you need to know:
- Definition of Asset Allocation
Asset allocation is an effort to diversify your retirement account into stocks, Bonds, cash, and so on. Asset allocation considers age because usually the older you are, the less investment risk you want to bear.
- Differences in Asset Allocation in Each Class
In asset allocation, there are three main classes based on how they are diversified. Some of these ways are through investing in stocks, Bonds, or in cash, the details of which you can read below:
- Shares
The allocation of assets into shares is not only in the form of stock investment, but can also be in the form of Mutual Funds. However, what you need to note is that there are many companies or market sectors that you should know well, especially in terms of their stock movements.
The reason is, this really determines your asset allocation. For example, choosing stock investment instruments in banking companies, the technology sector, mining, and so on.
- Bonds
While Bonds are asset management in the form of debt securities issued by private parties and from the government. You can allocate these assets based on the type of Bond by taking into account the maturity date and the number of benefits offered by the issuer.
- Cash
Next, the allocation of assets in cash is just as attractive. This is because you don't need to worry about the risk of investment losses when you have cash.
However, diversifying cash holdings is not a top priority. What's more, saving cash actually doesn't provide many benefits, except when the exchange rate increases.
For example, you allocate more cash into dollars which value can increase so that it provides benefits if exchanged into rupiah. Conversely, you will lose when the exchange rate falls.
Asset Allocation Based on Age
In managing finances, of course asset allocation needs to be done with a plan. To make it easier, you can allocate assets based on age as follows:
- Early Retirement Planning: In Your 20s
Generally, the retirement age ranges from 50-60 years. Even so, there's nothing wrong with planning early retirement from your 20s. This is early retirement planning.
This planning will be right on target if you manage to allocate assets properly so that you are free from financial burdens from a young age. It is recommended to allocate assets in stocks and Bonds with respective allocations, namely 80-90% and 10-20%.
The thing that you need to note when choosing retirement is sufficient financial capacity for life in the future. On the other hand, retirement means you stop working but that doesn't mean you can't make more money because you can still continue to make investments.
- Career Focused: In Your 30s
If you choose to delay investing in your 20s because you have to pay off loans or are just starting to build a career, then in your 30s you need to set aside money. You can manage these funds in stocks or some of the best Bond investment variants.
In terms of allocation, it is recommended to invest around 70-80% in stocks and 20-30% in Bonds. Apart from that, you still have about 30-40 more years of working time so that it is still sufficient to prepare for old age funds.
- Retired: In Your 40s
The older the retirement age you choose, the asset allocation will lean towards Bonds. Starting investing in your 40s is also not too late. Precisely this can be the right opportunity when your salary has reached a high rate and is suitable for large amounts of investment too.
You can allocate assets in stock investments worth 60-70% and Bonds by 30-40%. In stock instruments, make sure you understand market movements and global economic conditions, especially related to inflation to increase profit opportunities.
- Nearly Retired: In their 50s and 60s
As you are getting closer to retirement age, it's time to focus on investments that are safe but profitable enough. Asset allocation in shares should be approximately 50-60% and 40-50% Bonds.
The proportion of asset allocation is considered safer to minimize the risk of loss due to investment. Bond values are getting bigger because their value is more stable and you can invest in money market instruments if you have a low risk profile.
- Oldest Retired: In their 70s and 80s
For those of you who decide to retire at the oldest age, which is around 70-80 years old, the most asset allocation is preferable to the type of Bonds with a proportion of 50-70%. Meanwhile, in stocks, the value is only 30-50%.
The goal is not to gain instant profits because you can still continue to work until you are 70-80 years old. Moreover, even though stock investment offers a high return, it carries a large risk. Therefore, the allocation of assets in Bonds is higher because their value tends to be stable in the long term.
Tips for Proper Asset Allocation in Investing
Preparing for a retirement fund from now on is a wise decision to prepare for a safe and secure old age. For that, you need to manage assets properly too. Here are some tips that you can try in asset allocation.
- Adjusting Asset Allocation to Age
Age is one of the main considerations in asset allocation because it is closely related to choosing retirement. In addition, the age factor also influences the decision to invest emotionally.
In general, the younger age group tends to be daring in investing because they are often tempted by high returns even though the risks are quite high. However, this is not recommended as it can trigger some problems like premature losses.
Therefore, consider when to start investing and when to retire so that the allocation of assets becomes more proportional. The most important thing you need to understand is that the earlier the retirement age, the greater the proportion of asset allocation to stocks compared to Bonds.
- Consider Other Risks
Everyone has different financial capabilities so the level of risk in investing also varies. In asset allocation, you also need to consider aspects of intolerable risks such as political turmoil that could destabilize the country's economy.
On the other hand, don't forget to diversify your asset classes so you don't rely on just one investment instrument. That way, regardless of age, you will feel more at ease because there are some reserves during losses.
When you are 25 years old and you still have fears about investing, it is advisable to divide assets in a 50:50 proportion.
- Don't be Easily Affected by Market Conditions
In allocating assets, it is better to adjust to economic conditions because they will last long term. Whereas market conditions is very dynamic or changes quickly.
Therefore, avoid buying and selling assets just because you are tempted by market conditions that are profitable without doing in-depth analysis. Especially to buy assets just because of Fear of Missing Out aka FOMO.
Instead of being affected by this situation, it would be better if you pay attention to your investment goals from the start. In addition, make optimal use of the Investment Manager if you experience confusion in making transactions.
On the other hand, it is also important to allocate assets according to your investment strategy. For example, keep considering aspects of needs and retirement age so that you are more focused on achieving targets.
- Choose a Safe Investment Partner
Asset allocation will not work if you choose the wrong investment partner. Whatever the type of allocation, choose an investment partner that is safe and has received OJK permission because it is legal.
Also pay attention to the advantages and disadvantages of these investment partners. Be wary of investment services that offer instant profits with small capital because these are vulnerable to the risk of fraud.
Even now, there are many investment partners that you can choose from. These investment partners are also supported by Investment Managers who can help you manage long, medium and short term investment plans.
Prepare Early Retirement Funds with DBS Treasures
Now, there are many investment partners that you can choose to make asset allocation easier. Priority banking DBS Treasures is a wealth management partner that has been verified by the Financial Services Authority (OJK).
You can make DBS Treasures a partner for Bond investment. There are many conveniences that you can experience when investing in Bonds with DBS Treasures, which are as follows:
- Regular Coupons
Bonds at DBS Treasures offers regular coupons that will be paid regularly while investing in the selected Bond issuer.
- There is Capital Gain Potential
You can sell several types of Bonds even before the scheduled maturity date. In addition, investors will also gain potential profits from rising Bond prices.
- Competitive Coupons
Bonds will also provide a competitive coupon rate above the average interest on Fixed Deposits.
- No Additional Fees
Investors are not charged any additional fees. There is only the spread or the difference between the selling price and the buying price (bid and offer).
- 24/7 Transaction
You can access various types of Bond products that can be traded through the digibank by DBS Application. Interesting right?
Besides that, with DBS Treasures, you also gain the opportunity to be supported by curated market analysis communicated by a team of financial experts. Get the latest opportunities that have been adjusted to your risk profile and portfolio needs, driven by Artificial Intelligence/Machine Learning (AI-ML). This insight is equipped with curated solutions related to investment (Grow) and insurance (Protect), so you can quickly and confidently invest through your preferred media.
Take advantage of the opportunity to invest in various types of Bonds through DBS Treasure right now because there are so many conveniences. Find detailed information here.
