Investment Report Q3/Q4 2017
Retirees' strategies for coping with negative markets
In last month’s column, I discussed the impact that falling markets can have on those clients who are in the saving phase of their lives. I concluded, somewhat surprisingly, that for clients who are disciplined and invest in a certain way, negative markets can help build wealth. Although this conclusion is valid for half of the population (i.e. those in the wealth accumulation phase of their lives), what about those clients who are retired and looking to receive a sustainable level of drawings to help fund their living costs? The simple answer is that for retired people, a falling market environment has to be endured rather than benefited from. It is a time when the way a portfolio is ‘engineered’ will become a critical determinant of whether the strategy will be able to sustain the same level of drawings when markets turn negative. Don’t cut down half-grown trees. For retired clients, the way in which the portfolio is constructed has a lot in common with a diversified farming...
