Should I be more cautious with my investments?
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I recently turned 60, which has prompted me to start thinking about the future more seriously than I’ve ever done before. I have a pension fund and I’ve always gone for fairly high-risk investments – I’ve felt that there is plenty of time to recover any losses and wanted the opportunity to get better growth. Now I'm not so sure. Is it time for me to be more cautious?
Phil Beck of Smith & Pinching responds:
It’s true that our attitude to investment risk changes as we go through life so, yes, it is important to revisit how you feel about the level of risk you are taking. That doesn’t necessarily mean that you shouldn’t take high levels of risk now, but you should reassess your risk profile on a regular basis.
The critical point to make is that your pension investment strategy should be part of an ongoing plan that is monitored and adjusted as necessary as the years go by. If you have a plan that takes everything into account – income, expenditure, inheritances, property, family circumstances, etc. – then you can make sure that you will be ready for retirement at the right time.
Planning for retirement should take into account many different factors. Investment risk is certainly one of them, but you should also consider factors such as the lifestyle you want in retirement. You should identify your retirement goals and – with help from an independent financial adviser – work out what will be needed to reach those goals.
Assessing your investment risk profile is a detailed process that your financial adviser will take you through. It will involve questionnaires and discussions that should result in a risk profile description that is comfortable for you. There are four main areas that we would assess: your knowledge and experience of financial matters; your attitude to investment risk; your capacity for loss; and what is needed to achieve your investment objectives.
Having established your investment risk profile, and considering your overall circumstances and objectives, we can then recommend a suitable portfolio. Investments within the portfolio may vary in the amount of risk undertaken but the overall risk profile of your portfolio should be aligned with your own risk profile.
Any opinions expressed do not constitute advice. The value of your investment can go down as well as up and you may get back less than the amount invested. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
For more information, please visit www.smith-pinching.co.uk