On the ‘fairways’, there is margin for error and recovery, but on the ‘greens’ your shots need to be steady and safe.

Whilst driving your investments forward in the early years is important, as you approach your retirement years, the methods for creating wealth preservation and sustainable income need to be reviewed.

On the ‘Greens of Retirement’, there is little room for error, and even less time to recover, and therefore the investment strategies used in the earlier years need to be realigned, to provide increased stability and peace of mind.

‘Press the Pause Button’

I am not saying that everyone in retirement has to be cautious. However I do believe it is worth ‘Pressing the Pause Button’ and reducing the risk of capital loss in the run up to, and in the first few years of retirement, because you are making decisions that will affect the next 30 years !

Some people think that if they make a mistake with their investments in the first few years of retirement, then it will be OK, because retirement is a long time, and they will have time to recover.

But this is a myth, because as we know investment returns are not constant, nor are they an average, they happen in real time, ‘a sequence’, as the market dictates. There is a big difference between ‘average returns’ which hides investment risk, and the actual ‘sequence of returns’. Knowing the difference could mean you create a …

‘Rollover Lottery’ or ‘Rollover Pension’

Understanding ‘sequence of returns’, is the difference between creating your own ‘rollover lottery’, or falling into a ‘rollover pension’ … only this time its rollover and say goodnight to your retirement. This is because higher volatility when taking income, means you erode your capital much quicker.

Even Jack Bogle, the founder of Vanguard, the pioneer of index tracker funds noted, the biggest uncertainty of all, is the ‘Sequence of Returns’.

We all know you have your good investment years and you have your bad investment years. So when you start to take income, and you begin to draw on your investments, this can quickly lead to capital erosion, if you have a volatile portfolio, or if you have a few bad years in a row. So we need to…

‘Stop and Think’… because it really makes you want to stop and think !

Investing is a journey not a sprint.

Care and thought are required in constructing what’s right for the individual.

It’s especially important, not to rush into a ‘speculate to accumulate’ approach that looks great over the long term when taking ‘average returns’, but can quickly become a disaster if the ‘sequence of returns’ goes against you.

How much income should be taken, should it be monthly, quarterly or ad hoc, and should it come from gains or yield or both ?

On the ‘Greens of Retirement’ your shots need to be steady and safe. You just need to make sure you’re not playing the greens with the wrong club ! Now where’s my putter ?

The above commentary is for general guidance purposes only and does not constitute financial advice. Please consult your usual advisers before taking or refraining from any action. The value of investments and income from them can fall as well as rise, and past performance is not a reliable indicator of the future.