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Are Long-Term Investments the best for retirement planning?

What is long-term capital management?

Capital or investment management involves managing the assets of a financial portfolio as tax efficiently and profitably as possible. This could include equities or stocks, bonds, cash, property, and even alternatives like precious metals (gold and platinum, etc.), art, hedge funds, and cryptocurrencies.

A portfolio manager or financial planner actively manages an investment portfolio, ensuring optimal returns and growth aligned with the investor’s financial goals. This involves continuously monitoring the portfolio’s performance, rebalancing assets as needed, adjusting to market trends, and maintaining the portfolio’s alignment with the investor’s risk tolerance.

The goal is to ensure portfolio growth over the long term so that the investor can achieve their financial goals for retirement and live the lifestyle they envisioned.

Long-term refers to the 30-40 years an investor has to save before retirement.

An investor’s needs change over time, such as marriage, divorce, children, etc., and a portfolio, wealth, or financial manager ensures that adjustments are made to ensure that financial goals are met, e.g., increasing retirement savings to include a spouse or making extra investments to leave an inheritance to children.

How do I build wealth for retirement?

One of the most effective ways to build wealth for retirement is through regular investments that earn compound interest over the long term. Understanding your desired retirement lifestyle is key to creating a comprehensive retirement plan and determining how much to save. Here are some tips on how to build wealth for retirement.

Retirement planning

We all want to be comfortable when we retire, not worry about money, and be free to pursue our hobbies and retirement lifestyle. Having a retirement plan in place is vital, and some critical questions need to be asked, like what your current savings are, how much time you have to save, at what age you want to retire, and what kind of lifestyle you want. These all help devise a retirement plan. A financial advisor can assess your needs and current financial situation and put a plan of action into place.

See a financial advisor

A financial advisor is essential for a successful retirement. They have the knowledge, expertise, and experience to formulate a long-term retirement strategy tailored specifically to your individual needs. Most importantly, they will constantly monitor your retirement investments and make any adjustments as markets and circumstances change. Find a financial advisor who can travel your retirement savings journey with you to give you financial peace of mind, knowing that your retirement is taken care of.

Long-term investments

These are the basis of a good retirement plan: slow and steady savings that grow over the long term. It is very difficult to time the markets, which is why investing over the long term allows your portfolio to ride the ups and downs in the markets and helps mitigate risk. The S&P 500 alone has averaged 10.26% per annum since 1957.

Also, the magic of compounding interest can significantly improve savings. Long-term savings could mean lump sum investments or regular savings investments.

For example, a regular monthly investment of £500 over 30 years, earning an average of 7% interest, will give you around £600,000, of which £430,000 is compounding interest. You would have to invest a lump sum of £90,000 to achieve around the same savings over 30 years.


Multiply sources of revenue. Multiple streams of income

One of the best ways to mitigate risk in your portfolio is to diversify. This means investing in different asset classes (equities, bonds, cash and alternatives), different sectors (tech, health, energy, etc.) and different regions (US, Europe, Asia, etc.). By following this tactic, you are reducing the risk of financial losses that might occur in one of these asset classes, regions or sectors. Basically, you are not carrying all your eggs in one basket.

 If you were only invested in booming stock, for example, in the tech sector, you could achieve high returns, but if the tech sector performs poorly or crashes, then your entire portfolio would lose money, as opposed to having invested only a portion of your portfolio in tech stock. This diversifying tactic helps smooth out the ups and downs in a portfolio.

Tax Efficiency

Tax is something that no one can escape from. We are all responsible for paying taxes, but we can control the amount of tax we pay. A financial advisor has the knowledge and experience to find the best tax-efficient solutions for your money according to the country you live in and where your money is invested. Make sure that they have cross-border knowledge of taxation on your income and your investments.

Investment management

It is essential that your investments are managed correctly and efficiently to ensure maximum returns on your capital. An investment manager makes investment choices on your behalf according to your financial goals and investment needs and ensures that your portfolio stays optimised. This could include short and long-term investments, buying and selling, overseeing asset allocation, and making the portfolio as tax-efficient as possible. They will make regular adjustments according to market performance and rebalance the portfolio to maintain the investor’s correct risk tolerance.

Look for investment opportunities

The markets are constantly changing, and the best investment a few years ago might not be the best investment right now. While it is ideal to have steady long-term investments that grow with compounding interest over time, it is also prudent to review the asset allocation and sectors and areas of the portfolio to ensure optimum performance. Your financial advisor stays current with the latest investment trends and may include some new investment opportunities in your portfolio. If you are interested in alternative investments such as crypto or riskier assets, speak with your advisor to start a separate investment that won’t affect your long-term retirement savings.

Always revise your investment risk

Each investor’s risk attitude towards investing could change over time. Your financial advisor will adjust your investment risk to a more conservative approach as you near retirement, moving from a growth perspective to a preservation perspective. Risk levels vary from conservative to balanced to medium, moderate and more aggressive growth. The more adventurous and riskier portfolios tend to have higher percentages of equities to achieve higher growth. Higher growth means higher risk. Higher-risk portfolios are ideal for long-term investments as the portfolio has time to balance out highs and lows. As the portfolio nears retirement, the investment term moves into a shorter period; the advisor reduces the risk profile to a more conservative or balanced risk profile where equities get reduced and safer assets such as bonds get increased. This change allows for capital preservation as there is no longer a long term to reduce volatility.

Don’t give in to the masses

It is easy to get caught up in market hype. Navigating the world of retirement planning is already complex, and there are always concerns about optimising your portfolio. There are always asset classes that have boom growth, and it might feel like you need to constantly change your investments to incorporate them, e.g. the massive tech sector boom that is currently riding a tidal wave. Remember that your financial advisor has already diversified your portfolio, and more than likely, a portion of the booming sector will be included in your investments.  Retirement savings tend to be in diversified funds that offer optimum returns over the long term. Don’t let short-term fluctuations affect your long-term retirement goals. Slow and steady.

If you want to partake in the current market trends, you should have your financial advisor set up a trading account separate from your retirement savings.

Retirement planning is not as daunting as you think. Find a good financial advisor who can work out a long-term retirement savings plan and invest in diversified funds that will perform over the long term to build wealth.

Please note, the above is for educational purposes only and does not constitute advice. You should always contact your advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.

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