I’d drip-feed £250 a month into the FTSE 250 to aim to retire in comfort

Buying investment funds such as a FTSE 250 tracker can be a great way to improve retirement prospects along with regular contributions.

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I’m investing in the stock market to boost my retirement prospects. This isn’t going to be a strategy that’s suitable for everyone. Some investors may feel more comfortable using other assets, hiring a pension manager or taking out a pension plan, rather than investing money directly.

All of these strategies are perfectly good ways of building a retirement pot. However, I’m comfortable with the level of risk involved with investing directly myself. One of the tools I’m using to boost my retirement pot is the FTSE 250

Retire on the FTSE 250

There are many strategies I could use to invest my hard-earned money for the future. I could buy individual stocks or shares, or invest in a fund. I use the latter option. 

Picking stocks and shares can be challenging. Many fund managers struggle to pick the right stocks over the long term consistently. As a result, many funds actually underperform the wider market when all fees are included.

Passive tracker funds can be an alternative. These funds are designed to track a market index which, in this case, is the FTSE 250. All they do is buy and hold shares until they drop out of the index. There’s no active manager or team of analysts trying to pick the right investments. As a result, the fees are much lower. That means I can keep more of my money in the long term. 

Of course, there are some drawbacks to this approach. As a passive tracker is only designed to track the market, there’s no chance it’ll outperform. What’s more, if the market drops, the fund’s value will drop as well. One advantage other funds have over passive instruments is they can invest in other asset classes. This could reduce the impact a market decline would have on my wealth. 

So, while a passive tracker fund has its advantages, it also has drawbacks as well. Therefore, these products might not be suitable for all investors.

Many happy returns

I’m comfortable with both the benefits and drawbacks of passive tracker funds. I think they’re one of the most straightforward ways to profit from the stock market’s wealth-creating power over the long run.

Indeed, over the past 30 years, the FTSE 250 has produced an average annual return of around 11%. While performance should never be used as a guide to future returns, I think this shows just how beneficial owning stocks can be for my portfolio. 

That’s why I own an FTSE 250 tracker fund in my retirement portfolio. I think the market will yield steady returns over the long term, improving my retirement prospects. As long as I maintain regular contributions to the fund and don’t skimp on pension savings, I believe the stock market can help me retire in comfort. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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