Retirees need to hold their nerve: BetaShares
It is ‘critical’ for retirees to avoid panicking and cashing out their investments during this volatile period if they wish to benefit from any economic recovery in the future, according to BetaShares.
The turbulent markets in the past few weeks were testing investors as to whether they could hold their nerve but it was vital among retirees in particular, that they were able to remain invested.
This was because they had less time than those in a younger demographic to make back any losses. Putting assets into cash also meant they would miss out on any gains during the recovery at a later date.
Roger Cohen, senior investment specialist at BetaShares, said: “The decisions they make during this unprecedented event could make or break their retirement plans. It may leave some effectively ‘retirement trapped’ by their irrational decision-making.
“A panic reaction will cause many to sell at the bottom or on a bounce. They will not benefit from a subsequent recovery. While others may rebalance their portfolios (which generally sees reweighting into growth assets) too soon or too late,” he said.
It was important investors had the right mix of risk in their portfolios, a blend of growth and defensive assets which could be managed according to the market fluctuations such as a multi-asset exchange traded fund or a model portfolio.
“Many retirees will see their currently reduced super balances. I would suggest they look back at the Global Financial Crisis and ask themselves the question – what should I have done then?” he said.
“If the answer is along the lines of: ‘If only I had remained invested or had made different choices, take heed. We will come out the other side of this’. Base your decisions on that, rather than on the moment.”
AUTHOR
Laura Dew
Recommended for you
After introducing its first active ETF to the Australian market earlier this year, BlackRock is now preparing to launch its first actively managed, income-focused ETF by the end of November.
Milford Australia has welcomed two new funds to market, driven by advisers’ need for more liquid, transparent credit solutions that meet their strong appetite for fixed income solutions.
Perennial Partners has entered into a binding agreement to take a 50 per cent stake in Balmoral Investors and appoint it as the manager of Perennial's microcap strategy.
A growing trend of factor investing in ETFs has seen the rise of smart beta or factor ETFs, but Stockspot has warned that these funds likely won’t deliver as expected and could cost investors more long-term.
