Retirement Planning - ETF included

In a cooperation with Business Insider Magazine “Learning from the super-rich”, BeeWyzer is contributing articles and webinars since January 2025 in order to contribute lessons from managing big wealth to a broader public. In the end, an increase in wealth and investable assets is a driver of economic growth and beneficial for everybody. We are happy to share the articles in our blog also – feel free to skip if you are an expert already and enjoy the read if they offer valuable knowledge to you!

Sustainable retirement planning with ET and equities:

How growth-oriented and defensive strategies combined create solid wealth accumulation

By Christian Stadermann and Peter Brock, BeeWyzer GmbH

Retirement planning is a key issue for many people, especially with the relativelyvlow interest rates we had so far and uncertain stability of public pension systems in many countries. A sustainable strategy for wealth accumulation combines yield-oriented and defensive investments, factoring in local tax rules if necessary. A clever mix of high-growth and defensive ETF can create a stable portfolio with solid long-term returns, always taking the individual situation in the life cycle into consideration.

1. The individual life cycle

Every investor is in a different financial and personal situation. This should be the primary factor for the investment strategy:

- Young investors (20-40 years) are typically accumulating wealth and allow for a higher risk tolerance. With more focus on growth-oriented investments, as market fluctuations will disappear over a longer time span. Often there are also investments in savings plans, which combine with more aggressive equity strategies, allowing for attractive risk-adjusted returns over long periods of time at low personal effort.

- Middle-aged investors (40-55 years) are typically consolidating wealth at a higher financial responsibility with real estate loans, education costs for children, but also higher savings, stability being more important. Hence the strategy of a balanced mix with regular rebalancing for control risk, resembling more the ultra-rich semi-institutional investors. The main difference is the number of asset classes played with a lack of alternative investments.

- Investors in later stages of life (55+ years) are more concerned with risk protection of assets and have a shorter investment horizon, as market downturns could now jeopardize an adequate retirement provision. Their capital must be available at short notice - unless they are super-rich- and therefore consists of a higher proportion of defensive investments. At this point the equity allocation typically declines significantly. 

2 Let us now take a brief look at the individual strategies:

- Why use ETFs and equities for retirement planning?
 Both offer attractive long-term returns, especially compared to fixed-interest investments. ETF in particular offer a cost-effective implementation of broad diversification strategies with individual focus (dividend or sector focus, individual shares, growth vs. value shares). A certain degree of long-term inflation protection is usually built-in.

- Alternative and more illiquid asset classes such as real estate, private equity / venture capital or hedge funds further increase the degree of diversification: an investment in real estate, for example, offers both capital appreciation (a rather moderate development in Germany compared to other countries) and regular returns through rental income. However, entry hurdles do exist, such as higher minimum investment, knowledge, access and the long-term attire. Typically, an investment in illiquid assets should be started early on, so diversification can be realized even within these asset classes and the returns plus pay-back at ‘maturity’ can be enjoyed in the later phase of a human life cycle. 

- A growth-oriented portfolio focuses on equities and ETF with high return potential, such as technology and future-oriented sectors, emerging market ETFs or small and mid-cap companies. A growth-oriented approach can generate high returns, but is also associated with greater risk. Fluctuations should be factored in and accepted.

- A more defensive portfolio protects capital in turbulent market phases, for example through dividend stocks, defensive ETFs with lower volatility or sustainable bond ETFs.

The combination of growth-oriented and defensive investments depends on the personal risk appetite and investment horizon as described above. The portfolio is adjusted to the prevailing life situation through regular rebalancing.

An additional consideration for retirement planning is also the decision on how much wealth you can or would like to leave to the next generation. In this case, tax planning considerations should also be made – including local tax regimes and the suitability of asset classes for descendants.

More and more investors are attaching importance to ethically and environmentally responsible investments such as the implementation of ESG strategies, impact investing or green bonds. Sustainable ETFs and shares thus enable future-proof and climate-friendly retirement provision.

Conclusion

Sustainable retirement planning with ETF and equities combines growth and stability. Solid financial planning defines goals, optimizes income to expenditure and enables the accumulation of reserves with relevant asset classes. You can do this yourself or with the help of independent advisors or the financial services industry. Sticking to your strategy, keeping cost low (watch hidden cost!) and keeping an eye on risk will determine a successful implementation. Passive ETFs as cost-effective and liquid building blocks can be a good basis.
Besides the general life cycle and the individual situation, the cash flow profile must be considered. Some need regular income from their investments, some get from their job or other sources.

Family offices of the super-rich often invest with a horizon of 30 to 50 years. Instead of relying on quick profits, they take advantage of market cycles and hold on to their investments even in times of crisis. Private investors should ignore short-term market developments and pursue long-term goals free of emotional decisions for their retirement planning. Strategy, discipline and flexibility in the end make sure, you meet your targets and enjoy wealth in every phase of your life.