Imagine:
A market downturn causes a major loss of your retirement assets.
The past few years have been a reminder that the market has its ups and downs.
The problem with the downs is that you may not have enough time to make up for the losses you have suffered.
Market downturns always seem to happen in the blink of an eye. The recovery is always much slower.
For example:
Let's assume you have $1,000,000 today, but tomorrow the market crashes and all of a sudden your $1,000,000 is worth $650,000.
On paper, you now have a 35% loss.
Your first question will be: “how long will it take to get back to my $1,000,000?”.
A simple answer to how long it will take to get your $350,000 could be:
At a 5% annual rate of return, it will take 9 years to get back to your original $1,000,000.
In this example, your loss happened overnight. It took 9 years to recover your original principal.
Here is the real answer:
Years required to make up your $350,000 loss
The real answer is that had there not been a downturn, your $1,000,000 would have grown to $1,551,328 over the same 9 years at the same 5% annual rate of return:
$1,000,000 in 9 years at 5%: $1,551,328
$650,000 in 9 years at 5%: $1,000,000
Real Loss: $551,218
In other words, it is impossible to make up for a market loss given equivalent rates of return on your investment portfolio.
Capital losses, especially during the fragile first 10 years of your retirement, will have a profound effect on a traditional account based pension funds invested in traditional "balanced" investment strategy.
Repeated market downturns will be catastrophic.
How can we help?
Our recommended retirement income portfolios are designed to produce resilient, increasing long-term income.
We employ investment strategies that are adopted by leading local and international fund managers and which are designed to confront market downturns such as the Global Financial Crisis (GFC).
We do not recommend "asset allocations that match your risk profile" because your "risk profile" will be different once you have experienced a major financial downturn.
Our first and foremost priority is your income. Our recommended portfolios include sustainable investments that will provide you with sustainable income.
Your retirement is a time for enjoying time with family and friends. It is your reward for years of hard work.
Enjoying your retirement is a bit like keeping a promise to yourself.
Ensuring that sustainability of your long term retirement income is an important part of that promise.
