Investing in retirement can be a difficult proposition. On the one hand, you may need the money for living expenses today and will therefore want to move into income strategies.
This week, Tom Aylott wrote that there were some good investment trust options available to people nearing retirement, with financial advisers offering a range of portfolios and strategies. Most were more cautious, or had an income tilt.
It can be scary taking on risk when you have such a (hopefully) large pot that you have spent your life saving up.
However, if you are nearing retirement or have already given up work, there is the chance that you may live another 30 to 40 years. As such, it might also be worth looking at the trusts recommended for millennials as well.
The suggestion is that, with decades left to invest for their future, younger people should buy high-risk but potentially high-reward trusts such as Biotech Growth, VH Global Sustainable Energy Opportunities or Ashoka India Equity, to name just a few.
Yet those in their 60s could live for far longer than they budget for and should also consider having some of their cash allocated to these areas.
Financial advisers often model retirement savings to last until someone is 100. The smaller the pot, the more risk they will have to take to make sure that money can last.
Yet will a portfolio of income and defensive holdings see you through? It is certainly possible, but will very much depend on how much money you have saved.
While investing at a later age is tricky, young people are also facing investment headaches. Eve Maddock-Jones wrote this week that millennials and Generation Z investors were more likely to own cryptocurrency or get their investment advice from social media sites such as TikTok than use an adviser or another more trusted source.
The Vanguard LifeStrategy team said this was one of the biggest frustrations they had with the way investors are currently choosing to allocate their cash.
Mohneet Dhir, a multi-asset product specialist at Vanguard, said: “It really frustrates me when people don't think about the core questions like: why am I investing? What is my time horizon? And what are the factors I can control to make sure I get more bang for my investments?”
Retirees shouldn’t follow in the footsteps of millennials when it comes to investing. Diversification is key, no matter what age you are. If there is a chance you will need the cash in the short term, then a portion of capital should be put in more cautious assets (or not invested at all). This remains true for any stage of life.
With the rest, blending income, growth and value strategies, with a small satellite of high-risk investments, remains the prudent way to make sure you have enough to live on, but don’t give up potential future returns.