Retirement proof your money mindset

A quick guide for SASS members

No-one knows exactly when investment markets will rise or fall. But one thing’s for sure - the closer you get to retirement, the bigger the impact of poor investments on your retirement. That’s why it’s crucial to keep some golden rules in mind.

Investment plans that stand the test of time

Investing can feel like an emotional rollercoaster if you don’t have a plan. When investing for the long term, it’s about staying the course and sticking to tried and tested investment fundamentals that work for even the most experienced investors.

1. Diversify and spread the risk

One of the best ways to protect your investments from significant market volatility is to spread your money across different investments and asset classes (such as shares, fixed income and property). This can help reduce the risk of your investments losing value at the same time, increasing your chances of a better overall return.

It’s useful to think of your investments as part of a wider portfolio. If you’re a homeowner for example, you’re already invested in property. Taking this birds-eye view of your investments can help you make better decisions about where to put your money.

Remember - markets keep moving. So it’s just as important to keep adjusting your investments as things change to make sure you’re spreading the risk.

2. FOMO (fear of missing out) is not a valid investment strategy

It can be tempting to follow the herd as markets rise and fall. But as you near retirement, things get complex and the timing and order (or sequence) of your returns becomes more important than ever. Just one year of poor returns at the wrong time can have a significant impact on your retirement savings. The closer you are to retirement, the less time you have to recover any losses, so it’s crucial to have a long-term strategy and stick to it.

3. What goes up, must come down

Market volatility is challenging for even the most experienced investors. When markets fall, it can be tempting to withdraw your investment or switch to something ‘safer’, such as cash. But this could lock in your losses and take away the opportunity for your investment to bounce back and rise again. While things may feel turbulent in the short term, over the long term, markets tend to go up. That’s why it’s important to keep the long term in mind and stick to your investment strategy.

4. Don’t forget about inflation when looking at returns

Every investor hopes to get a good return on their investment. But returns aren’t always black and white. For a more accurate picture on how an investment is performing, look at the ‘real return’. The real return includes any tax you’ve paid on your investment, and considers the impact of inflation.

Investments that don’t keep pace with inflation drop in value over time, leaving you with less spending power later. When you’re drawing down on your money in retirement, you’ll need to make sure you have enough income for the rest of your life. You can offset the impact of inflation by not being too conservative with your investments and making sure your investment strategy generates returns higher than inflation.

Get help from an expert when you need it

Successfully managing your own investment portfolio takes diligence and skill. When the markets move up and down, it’s easy to let your emotions get the better of you. Working with an expert can help you feel confident you’re making changes to your retirement plan based on your needs, not noise in the market.

Questions? We’ve got answers.

Aware Super financial planners are highly skilled in the SASS scheme. Call us on 1800 841 633, Monday to Friday, 8.15am to 8.15pm (AEST/AEDT), or email us at clientservicecentre@aware.com.au

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Disclaimer

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