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Investors who do not make impulsive decisions will be better placed to meet their long-term objectives
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Diversification remains one of the most important tools to reduce risk
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Create a long-term investment plan and stick to that plan
Amidst all the uncertainty created by trade war(s), Brexit negotiations, noise around possible land claims and the fallout from President Trump’s latest Twitter outburst - planning for a comfortable retirement can be scary for investors. However, making impulsive investment decisions based on these current events could have a negative effect on retirement savings.
This is the advice of Quaniet Richards, Head of Institutional at Nedgroup Investments, who says history has shown again and again that over time that investors can weather the storm by not losing money in a downturn and by being able to take advantage of the upside when the market turns.
“Investors who do not make impulsive decisions will be better placed to meet their long-term objectives. But of course we understand that that may be easier said than done. That is why we always advise investors to partner with financial experts,” he says.
To help investors stay the course, Richards provides the following advice for retirement fund members to stay on track in their retirement planning:
- Make sure you are diversified: Diversification remains one of the most important tools to reduce risk in investments. When it comes to a retirement plan, make sure that your investments are diversified across countries and asset classes – this will help to manage the political and socio-economic risks locally.
- Stay the course: Throughout the history of financial markets there have been periods of turbulence and uncertainty. Just in recent history, markets have been through some severe shock events like the small-cap bubble, the Asian financial crisis, the tech bubble and 9/11 to mention a few – and through all of these events, investors have managed to weather the storm and not lose money by staying the course. To help take the emotional aspect out of your investment decisions, create a long-term investment plan and stick to that plan.
- Make sure your retirement portfolio is making use of an effective life-stage strategy: a good retirement strategy is positioned according to the life-stage of the investor and not the current market conditions. A life-stage retirement plan is one that is designed to adjust the asset allocation to have a higher allocation to equities when retirement is many years away, and typically hold a decreasing allocation to equities as retirement approaches. The theory behind this approach is based on the changing combination of human capital and financial assets.
- Use the tools available to you: Investors have access to may very useful tools when it comes to their investments these days. Technology has enabled fast, simple record-keeping so that investors can have real-time access to their investment information – and some Robo-advisors can even calculate exactly how much you need to save now I order to meet your retirement objectives. Richards says Nedgroup Investments has launched an automated online investment platform that calculates exactly how much an investor should save, recommends the best investment products to invest in to achieve that – while taking tax considerations and efficiencies into account. Tools like this not only keep costs low for investors but also empowers them to stay on track in their investments.
- Stay informed: Many investors have little to no idea of the current state of their retirement planning. By staying informed and reading each fund statement and update you receive, you are already taking very good steps towards a healthy retirement. Maintaining regular contact with your financial advisor is also crucial as you can discuss any concerns or issues you have as you go and you can also avoid making impulsive decisions by using your impartial financial advisor as a sounding board.
“It is never easy to experience financial market downturns; however, these strategies may prove beneficial to you over the long-term. In the meantime, make sure that you have a clear long-term investment plan that is linked to your objectives, stay educated about your financial portfolio and rely on the experts to remove all emotion from the decision-making,” concludes Richards.