Brexit has left many people wondering about travel and passports but what about the really important issue? We ask Noel Whittaker for his take on Brexit and your retirement.
Has Brexit ruined your retirement? The good news is that your retirement is not ruined due to forces beyond your control, but you do need to understand that every investment decision you make has a downside as well as an upside. If you choose to put the bulk of your money in cash, you will never have a worry when stock markets fall, but you will be taking the high risk that you will outlive your savings.
I strongly believe that shares will continue to be the best asset class over the coming years, but that anyone who invests in shares needs to understand that their prices are volatile, and it’s normal to have four negative years in every 10.
In the next few months there will be much talk about Britain in the news, but bear in mind the media tends to focus on the negative. If you watched the 6pm news on Friday you may well have been scared. We were told that millions had been wiped off our superannuation as markets fell, oil prices plunged, and the British pound had suffered one of its biggest losses in history. Yes – this was all true, but they did not mention that when the All Ordinaries index fell three per cent, it had simply taken back the gains of the week before. Similarly, Japanese shares were down eight per cent on Friday, but they had risen five per cent over the previous five days.
If your money is in superannuation, it’s almost certainly going to be spread between cash, property, cash bonds, and local and overseas shares. Usually when shares fall, bonds rise – this gives you an inbuilt safety buffer.
And it’s simply not practical to convert your assets to cash and then hope you will be lucky enough to pick the bottom of the market. History tells us that this is impossible to do consistently.
My advice to worried investors is to make sure you have at least two years planned expenditure in cash so you are never forced to sell when the market is having one of its normal downturns. Then, hopefully, you can sleep at night knowing your portfolio has time to enjoy the inevitable recovery.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions.