Retirement: Three questions you need to ask to get ‘best returns’ on your cash | Personal Finance | Finance


Retirement is costly, and as a result individuals are looking at various monetary vehicles to plan for life after work. Many people will opt for a pension, others turn to cash saving, while investment is becoming increasingly popular. spoke exclusively to James Norton, Head of Financial Planners at Vanguard UK, who offered his guidance to retirees. 

He said: “Seeing your investments fall is never nice for anyone, but for those who have already retired, older individuals, it can be worse psychologically and emotionally.

“Retired people won’t be topping up their investments, and they haven’t got the income stream to fall back on.

“How older investors think about managing their money is really very important. Fear and greed can kick in, so it is vital to act carefully.

“If you have a pot of £50,000 to support your retirement, you know that is a finite amount to last for your whole life, and to pass on to your loved ones.”

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“If you’re only taking a small amount, the portfolio will probably have time to recover.”

Mr Norton states that over the last 50 years, markets have tended to bounce back fairly quickly after downturns, providing buoyancy for those concerned about their returns. 

He added: “Even in major financial crises such as in 2008 to 2009, and the technological crisis of the early 2000s, markets have bounced back. If you hold on, you really will be fine.”

“If I sell, what am I doing with my money?”

Mr Norton explained many people sell their investments due to being scared about major events in the market, such as the Ukraine war, or Brexit. 

However, this is likely to be an incorrect decision for many individuals. 

He continued: “These things happen regularly, so if you’ve sold because you’re concerned, you’re only going to get back in to the market when you’re convinced things are more stable.

“This could be weeks, but it is more likely to be months or even years away.

“But by the time you are comfortable, the market will have realised it before you have, and it will be more expensive. This means you’ve realised a loss.

“It’s hard to get back in. In the short term you’ll feel great about yourself, but it won’t serve you in the long-term.”

“Does it matter if I miss strong days?”

Mr Norton and Vanguard analysed an investment of a hypothetical £100,000 put into global shares in 2000, and what this would have generated by the end of March 2020. 

They looked at what would happen to this investment if a person stayed invested, versus if they missed the best days by trading at the wrong time. 

Mr Norton explained: “That £100,000 would have been worth £325,000 at the end of the 20 year period, even with two big market corrections – the technology sell off and the global financial crisis. 

“However, we looked at what that return would have been if you missed the best 25 days. 

“You would have in fact lost £10,000, meaning the portfolio would have been worth £90,000.

“This is because a substantial amount of the market return happens in a few days. Once you strip these out, your return falls substantially and you don’t get the best returns you’re hoping for.

“If you can’t pick out a needle in a haystack, then buy the haystack. Essentially what this means is just stay invested. You will get those returns if you do.”

Of course, it is worth noting that investment involves a certain level of risk and is therefore not suitable for everyone.

The value of investments can go up or down, which individuals should be aware of.

As such, some may wish to take financial advice before making a decision. 



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