Hope is not an investment strategy
Do you have enough to Retire?Free Retirement Plan Health Check
With local and International share markets at record highs, now might be the time to check in on your investments.
A lot of good news is being priced into the markets at the moment despite plenty of emerging risks that could end the boom.
So, what should retirees be doing? Is now the time to be complacent and hope our super balance will continue to rise, or should we be more active and review our investments in light of the emerging risks?
A golden run
In the past 12 months the US share market has increased by 29% and it is currently sitting at record highs. Locally, the Australian market increased more than 23% during the same period.
These returns have been fueled by Government stimulus, record low interest rates and the global rollout of the Covid vaccines. Worldwide, the recession was shorter and the economic recovery faster than expected. Here in Australia, the level of employment and economic output have both recovered beyond their pre-pandemic levels.
But there are emerging risks to this golden run.
Know when to hold ‘em, when to fold ‘em
In Australia the Delta strain of Covid appears to have taken hold, with the previous ‘zero Covid’ approach no longer achievable. The plan now appears to be to drop restrictions once a threshold of adults are vaccinated, but that may not be achievable for months.
Until then, Australia’s economy will continue to suffer from the lockdown, and that will place the projected recovery at real risk.
There are political risks as well. Taliban rule has returned following the collapse of the Afghan government. Further terrorist attacks are a real possibility, and they will negatively impact on trust and confidence in the Biden administration. Worse still, all of this may reignite a 20-year war we thought was over.
No time for complacency
There are real risks that markets are overheated, that current share prices are inflated, and that one or more negative events will reverse investor sentiment.
That’s why there is no time for complacency. Now is the time to check on your progress.
It is likely that your financial plan is tracking ahead of your expectations. If that’s the case, you have options. You could start spending more day-to-day, sell down some assets to lock in profits, or even reduce the risk profile of your investments.
Retirement planning is not a ‘set and forget’ exercise and hope is not an investment strategy.
At When Financial Solutions we’re continuing to operate during the lockdown, and we’re accessible via phone and video conference. So, it’s not a matter of ‘if’ you can revisit your investment decisions but ‘when’.
Michael Bowman and James McMaster are co-founders of When Financial Solutions. This article is general and does not consider your personal circumstances so it may not be appropriate to you. If you would like advice specific to you, please give us a call.