Where should you invest your retirement income
The good news is that with some sensible and tailored planning you will be able to sleep at night. Sustained performance can be achieved without volatility.
We have no idea what will happen to world markets over the next few days, weeks or months although there do seem to be plenty of journalists and pundits, presumably with crystal balls, willing to proffer doom and gloom or equally flippantly dismiss recent events.
As an investor you can either do nothing and ride the roller coaster, cash in or take a more pragmatic approach and plan how best to deal with potential volatility in future.
The term and type of your investment will have an effect on your thought process. The longer the term of the investment the easier it is to manage your expectations because there is time to adjust and recover should markets fall.
However, many investors in things like Pensions and ISA's will have given little thought to the investments which underpin the policies they have. They will have purchased a big brand name pension or ISA and accepted they were 'Medium Risk' (middle of the road is the easy option) at the time they took out their plans. The resultant funds selected to support the product will be more than likely what is called a 'Balanced Managed Fund'.
If you took advice or purchased products of this nature from an adviser working for one company, as opposed to an Independent Financial Adviser, it is very likely that the adviser in question was not authorised to give genuine investment advice and would have signed you up to one of these middle of the road one size fits all investment funds.
Many of these one size fits all funds are now closed for new investors or so large that to react to market change in nigh on impossible. The resultant returns are more likely to be poor by comparison with alternative options and, would you believe, often quite volatile.
This is not good news if the funds are designed to produce your retirement income or a sum of money earmarked for a specific event or purpose for two reasons. Firstly the returns may not be anywhere near as good as your were 'promised' and secondly if you get your timing wrong and need the money when there has been a market fall you may have to take far less in benefits or defer your plans and await a recovery.
If you have invested your money and not reviewed the performance and continued appropriateness, on a regular basis, you have to accept some of the responsibility if things have not gone to plan.
What was right for you some years ago is not necessarily right for you now but it's easy to check. When was the last time you did?
All investments carry some form of risk however small. If we want our money to work for us we have to take some risk unless you accept that inflation will eat its way into the cash hidden under the bed.
Good advice is about understanding need and setting expectations. Our recommendation is to seek specialist Independent Advice now if you have concerns.
A good adviser will take time to get to understand your personal views and concerns to enable him or her to best asses your attitude to risk. Some advisers will ask you some searching questions that will really make you think. Be prepared for this.
Select an adviser committed to regularly reviewing your portfolio in line with your needs and be prepared to take a few minutes from time to time, with his or her help, to check if your attitudes have changed and adjust accordingly.
Andy Hawthorne is the Managing Director of Pensionlite Independent Financial Advisers. Pensionlite provide a Free no obligation Pension Review Service. For assistance contact Pensionlite on 01952 614272 or email Pensionlite - quoting reference: PLSD1.
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