Investment strategies for retirees

The Sterling Report

Lisa Minto-Powell

Sunday, January 20, 2019

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THE new year has started with a great deal of uncertainty following the enormous volatility experienced in 2018. Last year there was an abundance of global economic uncertainty, political changes, and sharp market movements among other things. These would have left many investors feeling stressed. If one blinks, one may miss something and this makes us feel uneasy and worried.

There would be heightened concerns for retired investors who depend on their investment portfolio and other income streams to live. In addition to the natural worry that heightened volatility causes, there is also a fear of missing out (FOMO) on opportunities in the market.

FOMO drives the behaviour of a lot of investors. While financial volatility is the norm these days, we need to look at not getting so stressed out because this may lead us in the wrong direction.

So today we are looking at staying calm in the storm, especially as it relates to investors who are retired. At this stage of life, managing one's finances is at the forefront of one's mind.

Fortunately, many investors who are officially retired have continued to work, many of them providing consultancy services or keeping busy with other means of employment to stay busy, keep fit and continue to save.

We do know that as you get closer to retirement your investments become less aggressive. At this stage you feel the need to reduce your positions in stocks and move to more stable investments like bonds and money market instruments. Experts will suggest, nudge or tell you to invest in some good bonds and make selective short-term investments with a mix of real estate investment.

Always question how stable your portfolio is for the long years ahead. Ask yourself if you are diversified enough to take the hits and misses. Is my portfolio allocation so high risk that I can't sleep at nights? Would I be able to withstand a loss of more than 50 per cent should the market plummet? Can I recoup?

If this a resounding “NO”, you should sit down and reassess how you can reduce your portfolio in all areas — especially if you are invested heavily in high-risk securities. This will give you more peace of mind.

The right portfolio of bonds can mimic an annuity to provide predictable income for the retiree. This approach is often considered when the investor calculates their monthly income requirements. Once the income requirements are met, the investor may add in other types of investment to improve the growth component of the portfolio.

This other tip is often practised; the strategy is to provide increased peace of mind by sticking to a two-year preservation plan. The idea is to keep up to two years of basic living expenses in cash to cover, say, the cost of everything that is essential to survive.

With this buffer, you can try to avoid troubling your investment portfolio for a while to give you time to build your retirement fund. Some will say that too much cash earning very little will decrease your potential to make more money.However, peace of mind is everything when it comes to a healthy retirement plan.

Continue to look for higher returns within reason, this means carefully assessing each new investment opportunity. This will help guarantee a higher rate of return on a portion of your portfolio over the long run; this of course must be a reasonable decision. If in any doubt and to avoid temptation, just stay the course while seeking professional help.

Lisa Minto-Powell is the AVP, Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at Feedback: If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at:

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