How to worry less in retirement by playing the investment game right!

Many factors contribute to your investment return. One of the most important ones…staying the course.

Ignore this at your own peril…

Two years ago, I’d had to swallow my own advice. Not investing but fitness.

I took on a challenge to get in better shape. It involved reducing my calorie intake combined with the right workouts.

From the start the instructors had mentioned, if you follow the process and put the work in, you will see results.

No different to investing, The same principle applies. You need to stick to your plan if you want the results.

Yet, after the first week, I didn’t see the results I had been looking for. I’d cut carbs, sugar, alcohol and completed the workouts. I had the odd headache (part of cutting out sugar, I’m told) and felt knackered.

But, that was my body readjusting to the new way. I asked the instructors why. Their response…follow the process and plan and the results will come.

While hard to accept. Given my love my red wine and had to give up one of my favourite past times. I followed through with the plan.

The results did come.

And this is where many get it wrong when they invest. They expect the results to come immediately.

Here’s the thing, you have to remain invested at all times. No one knows when the returns will come. But miss those big days and your returns will be a fraction of what they should be.

Time the market at your own peril. It’s a sure fire way to blow up your plan.

If you are 5 years out from retirement it’s critical to add a safety margin to your portfolio. It’s what the finance industry calls “sequence of return” risk. The order in which returns generated. If you do not plan for this, you risk blowing up your retirement plan…

Don’t believe me, let’s look at the research…

Morningstar, an international research company undertook a study on this very topic.

What they found provides valuable insights to help you ride the wave of investing.

In their study of investment returns from 1926-2019, by investing $1 in 1926 saw it increase to $9,244 by 2019. Here’s the kicker. If you had missed the best 51 days in the market over that period, your total investment would have been a measly $21.62.

Too long you say, let’s look at something more recent?

Morningstar looked at investment from 2000-2019. The same $1 invested in 2000 was worth $3.24 at the end of 2019. But miss the best 11 days of investment returns over that period and that same $1 was worth $1.28.

A potential cancer in your retirement plan if you try and time the market.

Here’s the thing. We don’t know when those returns will come.

November is proof of that. If you stayed out of the market, you would have missed some healthy returns…

Australian shares (top 200) generated a return of 10.21%

Australian Financial Companies returned 16.11%

Listed Property generated 13.25%

S&P 500 (Top 500 companies in the US) returned 11.44%

These strong returns in November 2020 represent nearly two years of returns in a matter of weeks. Some of this is catch up and some bringing future returns forward as confidence returns.

Does that mean you need to sell? It depends…

What it will mean is future returns will be lower.

With any successful retirement plan. Considering the amount of risk you are taking vs the risk you need to take is critical.

Remembering the investment industry want you to take risk. It’s how they make their money…

7 critical questions you need to be asking right now:

• Is my investment strategy up-to date for current conditions?
• Am I still on track for the retirement I want?
• Am I positioned to take advantage of hidden opportunities volatility can offer?
• Am I protected against “sequence of returns” risk and the dangers of withdrawing too much from a portfolio that has lost value?
• Is my portfolio adjusted for risk based on my age, lifestyle and “investment personality”?
• Are there advanced investment strategies I should be considering that may help mitigate the effects of volatility?
• Have I discussed my investment strategy with a financial professional?

If you can trade panic for poise while remaining calm, you’ll sail through in great shape.

As an adviser my job is to provide a calm, reassuring presence when the future is uncertain. I’m here to help my clients avoid panicked reactions and stay focused on the big picture.

“living your best life free from worrying about whether you’re going to okay”

Now may be a good time to reassess your retirement planning strategies. Assessing the ideal level of risk to achieve and keep the lifestyle you want.

Answer you biggest retirement questions by scheduling a call here>>

If you need to make prudent changes or course correct, we’ll let you know.

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Your guide in helping you live a great life with more confidence!

Glenn Doherty – CFP – Money Mentor | Taking the stress out of planning your self-funded retirement | Founder of Jigsaw Private Wealth

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Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at date of publication. This is an online information blog. It does not imply an offering of securities.