Retire in style with enough money for a comfortable existence
How is this possible with traditional share market investments?
The traditional investment strategy is to spread the investment risk across a wide range of asset classes because it is too difficult to pick winners and losers. This accepted theory, amongst Financial Advisers, is to spread the risk across a broad spectrum of assets rather than an isolated asset class. This strategy relies on the theory that global financial markets are always in turmoil so therefore it is better to spread the risk amongst a larger share of assets than simply using a narrower asset focus.
Furthermore, share markets per say do not behalf in a rational manner as they either over-shoot or under-shoot the perceived financial catastrophe. This over reaction in the market place creates investor uncertainty as income and capital returns can decrease rapidly overnight. The more conservative investor requires control and certainty over outcomes rather than the wild fluctuations that have been apparent recently.
The retire in style strategy with enough money to afford a comfortable retirement reduces share market risk by limiting the exposure of the funds under management to reflect the volatility and risk of the share market overall. For instance, share markets fell by 50% during the Global Financial Crisis. Therefore, the prudent investor will factor into the investment decision the amount of risk and return by investing in this particular market.
The more sensible approach to investment is to invest in areas that give lower constant returns where price variation is less volatile. Most people have accumulated their main source of wealth through the purchase of the family home or direct investment in property. They have very little exposure to the share market as a method of wealth creation.
Our view of a sustainable investment strategy is to follow a similar path by gearing into direct investment property, with a good percentage of the investment portfolio in cash to provide liquidity, and a small exposure to share market or equities.
This strategy has seen our client’s super funds increase in value over the past two or three years since the Global Financial Crisis. However, this strategy also has its pitfalls in the selection of an investment property as most investors select a property that they would live in rather than the rate of return, economic growth in the area, or the most tax effective property.
We provide as part of our service through our Licensed Real Estate Agent a selection of investment properties that can guide clients through this selection process.