During this Covid -19 pandemic, one thing is certain and that is that nothing is certain and stock markets do not like uncertainty.
Over the last few weeks, we have witnessed the shortest sharpest shock to the stock market in history. World Equities fell by close to 30% YTD to 23 March 2020.
It is unlikely that we have seen an end to the volatility in the markets until the Covid-19 virus is contained across the globe. There is a huge amount of uncertainty surrounding the economic outcomes of this when it is over. During the coming months, we should be able to get a better view of the long-term economic effects. Nevertheless, for now, we should expect increased volatility as market participants gather and interpret any new information.
Here are some thoughts for saving for retirement during this period of uncertainty.
Re-visit your investment goals
It is easier to invest when you have a clear goal that takes specifically into account your investment time frame. For example, if it is your retirement fund your primary goal is to accumulate enough savings to create the income you need in retirement. In this regard, your investment timeframe will be determined by the number of years left until you plan to retire and whether you plan to purchase an annuity or invest in an Approved Retirement Fund. This will inform that sort of fund that suits you.
Define your Investment Risk Profile
If your time frame is long enough to warrant a high or medium-high investment portfolio, do not panic now that the market has experienced such a shock. We know that when it comes to investing in your Pension savings, a highly volatile market is uncomfortable for most people. The Stock Market lows can often prompt short-term emotional decision-making and actions to buy or sell when perhaps the right thing to do is nothing.
Do not try to time the market.
It is impossible to consistently predict the market; even the experts cannot do this. Many investors believe that they can guess what will happen, based on pure speculation and perhaps the media. However, unless you know precisely when to switch in and out of funds you will most likely miss the market. This can really cost you. Most of the market’s gains occur in just a few strong, but unpredictable, trading days. To benefit from the market’s long-term performance, you need to be in the market on those days. This means you have to invest for the long run and stick with it throughout the market’s ups and downs. As long as it is within your time frame that is.
Do not pause your contributions
If you are making regular pension contributions or AVC’’s it might be tempting to pause this now. If you can afford to continue making pension contributions then you absolutely should. Investing now, while markets are low means that when the markets bounce as they always eventually do, you will be invested and your money will participate in the gains.
We have no doubt that the current climate is challenging us more than we thought possible. The construction industry has been one of the worst affected industries and as a result, seeking financial advice is more important than ever.
Our financial services consultant, Susan O’Mara specialises in the construction sector and can review your finances with you, explaining your options in clear English. No jargon – just the facts.
For further information please contact Susan O’Mara via email or phone: (01) 406 8020. Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.