It’s not an easy ride for investors today, when you consider some of the actual and potential headwinds facing you,

• Covid-19
• GDP down 6% in Ireland in Quarter 2 2020
• A market fall of >30% earlier this year
• Negative interest rates on offer in the Irish banks
• Brexit – will there be a deal?
• US presidential elections – what will happen there?

Any one of these on their own would appear like a big deal. But all of them within one year – wow!

It can be difficult to remain calm with all this swirling around. But that is exactly what’s needed here – to remain calm. And it’s our job to help you do that. We’ve seen these situations before, where the sense of needing to take action, even any action at all seems to be right course. But it’s not, instead it’s important to follow the well-worn path of staying focused on your plan. Here are a few thoughts to help you to stay committed to that plan.

Remember your time horizon

Short-term volatility is just that, short-term. Your investment time horizon will typically be more than 10 years, maybe 40 or 50 years if you are looking at your pre and post retirement timeframe. A blip in the market is just that. The S&P500 fell 34% between 19^th February and 23^rd March this year. However, by the start of September, it was back to 5% up on its previous peak of 19^th February! Lots of people panicked and bailed out of the markets at the end of March, and missed the rebound. Thankfully our clients didn’t, you stayed focused on your plan and your long investment time horizon.

Focus on what you can control

All of the headwinds mentioned at the top of this piece are outside of your control. But what you can control is having clarity of your goals, your timeframes and your willingness to accept risk. With our help, you can then build a plan and a financial portfolio to help you achieve your objectives. Focus on these things within your control, get them right in order to achieve your objectives. The other factors are unhelpful noise. And then together we’ll regularly review your plan and your portfolio to ensure it continues to meet your needs. 

Aiming for higher returns increases volatility (this is not a bad thing)

When you are investing over a long timeframe, investors are often willing to take more risk with the aim of achieving higher returns. In this scenario, your carefully crafted investment portfolio will likely contain more risk assets such as equities. This will in turn increase the short-term volatility of returns. This is not a bad thing; volatility is simply an expected feature of higher risk asset classes. As an investor, you need to expect volatility and be comfortable with it. Otherwise, you should consider reducing the risk within your portfolio, and also your likelihood of achieving higher returns. 

Be realistic

Of course we would all love to achieve double digit positive returns every year. But this is simply unrealistic, certainly without taking extreme levels of risk, which in turn increase the potential for significant downwards swings. Don’t build your plan around unrealistic and unachievable expectations. Instead build a plan that can be realistically achieved over the longer term in usual market conditions, with all their highs and lows. Then review the plan regularly to ensure it remains the most realistic way of achieving your goals.

Leave emotions at the door

As probably the world’s greatest investor Warren Buffett once said, “Be fearful when others are greedy, be greedy when others are fearful”. The point he is making is that markets are often driven to extreme levels by irrational exuberance. This is demonstrated by people piling in and buying as markets soar upwards (greed), and by people selling out of markets that have fallen sharply (fear).

Of course Buffett was noting the contrarian opportunities. Instead of succumbing to the emotions of greed or fear, people should only consider selling when markets have had a good run and are now expensive, or buying in when markets have fallen and now are cheap.

Yes, the investment world is a little uncertain at the moment. But the sun will rise tomorrow and the day after. Stick to your long-term plan and increase your chances of achieving your goals.

Look, it happens regularly… people realise that with their current retirement planning approach, they are going to fall short of achieving the lifestyle they want in retirement. This happens for a whole lot of reasons – not having a plan, starting to save too late, not saving enough or the wrong investment strategy.

The starting point has to be getting a clear and realistic picture of where you actually stand. We can help you here, by assisting you in,

1. Identifying the lifestyle to want in retirement
2. Putting a cost on that lifestyle – the fund you will need to achieve it
3. Seeing if you are on course to achieve your targeted lifestyle with your current retirement funding plan (including all sources of income in retirement)
4. Identifying any shortfall
5. Coming up with a plan to address the shortfall.

Let’s assume you’ve done all of this, have identified a shortfall and want to do something about it. Here are a few options that you can consider,

Work longer

The state pension age will soon be out to age 68, some feel this will be extended further to age 70 in time as our changing demographics will cause the state pension to simply become unaffordable in years to come without such action. But we should also recognise that in general, we will all be healthier through our 60’s and 70’s than generations before us, and will be well able to continue working.

Many people will want to keep working, some may need to in order to further fund their retirement. So start thinking about how you might keep working longer than you originally intended, even on a part-time basis.

Save more

Yes, this is often easier said than done, but it’s an obvious way of improving your lifestyle in retirement. Do you really need that second holiday? Do you need to change the car every 4-5 years?

While we were all forced into the situation, one thing many people learned during the Covid-19 lockdown was that our spending patterns can be reduced. Foregoing some of life’s pleasures today is a sure-fire way to helping you to build a better lifestyle in retirement.  

Lower your sights in retirement

Another action you can take is to revisit your desired lifestyle in retirement. Maybe you have been aiming for the dream lifestyle, which is truth is simply beyond your capacity to achieve. It’s really important to strike the right balance between building the future life you want, while also enjoying your life today! Neither should be done at the total expense of the other – it’s all about balance…

Review your investment approach

Handle this one with caution, this is where you need our advice! But reviewing your investment approach may be part of the solution. This would need to be very carefully considered, taking into account your investment timeframe both pre and post retirement and your attitude to risk among other factors. Any tweaking of your investment approach would need to make sense when considering your financial plan and all of your financial objectives. This is definitely one to consider… but with a lot of care.

Look for BIG savings

Have you considered downsizing your house in retirement? You may love your current home but living in it during retirement may prevent you from doing many other things you love. For many people, their family home is far and away their biggest asset, with a lot of wealth tied up in it.

Downsizing to a smaller home in the area may possibly be the answer to your financial challenge in retirement. Also if your home is fairly big and your family have flown the nest, do you still need the space? Maybe having a smaller garden to maintain will be a benefit too in your later years. Moving house may just unlock the retirement lifestyle that you really want.

While some of these suggestions might not appear to be too attractive, at least you have some options. Now is the time to consider them, as the longer you delay, the steeper the hill becomes. We’ll be delighted to chat through all of your options with you.