To access the 'No retirement for investments' white paper, please click the download now button above.
Important notice: a previous version of this whitepaper incorrectly stated the ASFA comfortable retirement standards for a couple as $43,787/year and superannuation balance of $545,000. These figures relate to the comfortable retirement standards of a single not a couple. The standards for a couple are $61,786/year and $640,000 in superannuation balance.
The duelling forces of retirement
It is normal for retired investors to need to manage their portfolios for a stable income, a level of growth and capital protection, but current market conditions are making this particularly challenging.
Faced with globally low interest rates on one hand as a threat to their income, and market volatility from geopolitics like corona virus and tensions in Iran affecting growth assets, how should retired investors manage their portfolios?
ETF Securities recommends three options summarised below: product selection, income diversification and portfolio construction. You can read the full paper by downloading above.
1. Product Selection
In retirement, investors need to be conscious of the quality, flexibility and costs of the products they use for their investments. One product type investors may consider are ETFs which hold characteristics such as lower costs compared to active funds, typically high liquidity allowing investors greater flexibility and are easy to use with less administration compared to shares or bonds.
2. Income diversification
Investors have traditionally looked to Australian fixed income for their key yield option. In the current environment, they should consider diversifying their income,such as looking at fixed income internationally where there may be higher yields available or through dividend streams. Dividend streams can be a riskier option, and where some retired investors may use high yield shares and offset the risks in other ways, others can look to options in more stable, less cyclical industries like infrastructure.
3. Portfolio construction
Retired investors should consider the overall construction of their portfolios and ensure they are diversified across assets and regions for growth and income, after all, the portfolio still needs to grow and support the lifespan. One area retired investors may wish to look at incorporating as part of the overall construction is alternatives, in the form of commodities like gold which can assist with stability and diversification.
For more information on the solutions ETF Securities offers, please speak to your financial adviser or contact us on: