From a young age we are taught about the importance of patience. And for many of us, it’s not an easy trait to master. But when it comes to super, patience is a virtue that we should practice from our early working life right through to when we’re drawing a pension from our retirement savings.
The reason we say this is because there have been many instances in share market history where we can learn for the future. Historical behaviours and outcomes can help to guide decision making and show us that sticking with a sound investment strategy can often be the best way to ride out the peaks and troughs that investing entails.
It’s common behaviour when there is obvious volatility in the market, investors ask if they have the right investments and whether they should make a change to a lower risk option?
We talk a lot about market volatility and the importance of strategy in choosing the investment vehicle for your retirement funds. And when it comes to your super, it doesn’t matter whether you are still saving for your retirement or you are now accessing your super through a pension – it is still important to understand your investment strategy, how investments work, and what they mean for your financial future.
And most importantly, why making snap decisions primarily based on a market downturn are often not in the best interests of an investor. For pensioners, a decision like this could have serious implications for longer-term pension outcomes and they could face the risk of running out of money during retirement.
So, why shouldn’t you just put all your retirement savings in low-risk investments to save the discomfort of the highs and lows? Well, to put it simply, low-risk assets may look safe, but they can be at risk of not keeping up with inflation.
However, it should be noted that options within this defensive category should be considered depending on your current life stage and the contingencies that need to be considered for your personal circumstances. When we’re developing an investment strategy, we take all of these factors into account.
We understand that market volatility is a concern for many. And yes, some asset classes present more risk than others. However, with a combination of determining your risk profile and considering your future goals, we endeavour to develop an investment strategy that allows you to sleep at night. When you have these kinds of plans in place, a downturn in the market doesn’t need to concern you.
Historical representations of the share market show that switching to lower risk assets at the point of a market downturn mean you miss out on a subsequent recovery in the market. This is where patience and trusting the strategy can help.
By using a financial planning professional and taking a considered approach to your investment strategy, it will allow you to feel comfortable through any downturns while still knowing you’re on your way to reaching your goals.
With market knowledge and experience, your advisor can keep track of your portfolio and make any adjustments as needed. A licensed advisor will always consider the effect of market downturns and plan for them as effectively as possible.
Depending on your circumstances, your advisor may look at a strategy that segments your investment which means income is available from other avenues, so you don’t need to sell down assets in a downturn. This is especially helpful when you are drawing a pension from your super.
At the end of the day, you will need to feel comfortable and RJS Wealth Management Strategic Planners are always ready to explain the strategy that is being developed.
We will never commence an investment strategy you don’t feel comfortable with as it can be detrimental to change course during a period of negative returns. We listen to your concerns and discuss the reasoning for our advice.
And if you do get the confidence wobbles down the track, please seek advice before making decisions that may have a greater impact on your retirement savings than the short-term market movements you might be experiencing.
This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individual’s personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.