We retired at the end of the last financial year and made some investments in several managed funds. We are quite concerned that our returns over the last six months have been all over the place and we are considering withdrawing from our investments and putting the money in the bank. Do you think that this would be the right thing for us to do?
Mr. & Mrs W.
You may be tempted to take matters into your own hands by withdrawing from your investments, however you should not react to short-term moves in the financial markets and keep your long term investment strategy firmly in mind.
Prevailing economic conditions will result in individual investment classes such as shares to over or under perform other classes such as fixed interest for example. Trying to pick the best investment is fraught with danger and therefore having a balanced portfolio that is structured upon the expertise of a professional adviser or fund manager is a lower risk approach to take.
It is critical that you take a long term approach to your investments, remembering that the average 60 year old will need to fund at least 20 years of retirement. This means that your money must be able to provide you with investment returns that will sustain your capital and provide you with a rising level of income over a long period of time. You simply will not be able to achieve this basic objective by putting your money in the bank - you must invest for capital growth as well as for income.
Investing for capital growth means that from time to time you will experience disappointing investment returns in the short term, but history shows that quality investments always recover and go on to ever higher valuation levels over the long term.
You have been unfortunate in that stock markets experienced some negative returns recently and this can be quite unsettling, especially when you are new to investing. I strongly recommend that you retain your investments provided that they are basically sound and are of good quality. You should seek professional financial planning advice and establish a relationship with a financial planner to ensure that your investments continue to be appropriate to your needs.
The information in this article is of a general nature only and should not be acted upon without first seeking personal financial planning advice. This article was provided by independently owned AFS Licensee (No. 236855) Direct Advisers Pty. Limited. They may be contacted on 02 6583 7588 begin_of_the_skype_highlighting 02 6583 7588 end_of_the_skype_highlighting or enquiries@directadvisers.com.au for a free consultation or further information.
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