W
L
RETIREMENT PLANNING: ARE YOU
INVESTING FOR INCOME, GROWTH OR BOTH?
by Sam Hulson of First Equitable
If you have already entered or are approaching retirement, your
priority may well be to generate an income from your investments
- rather than to pursue further capital growth. After all, turning
on the taps for an extra income stream could help you realise your
ambitions. However, those people who invested solely for income would have
likely missed out entirely on this growth. This is because emerging
companies – and not just in the technology sector – seldom deliver
income to their shareholders in the form of dividends, as they are
reinvesting their profits, and that’s if they have any, for future growth.
HAVE A STRUCTURED PLAN
In all scenarios (investing for income, growth or both), structuring a
well-thought-out blend of investments should be at the heart of your
wealth strategy. So even if you are now (or will soon be) prioritising
income, it could make sense to keep a portion of your investments
working in pursuit of growth. This might seem counter-intuitive, but
here are some ways to do this: LONGER-TERM APPROACH
By investing some of your portfolio in companies with longer-term
growth prospects, you might avoid the fear of missing out on the
next opportunities. If you have the next generation in mind for some
of your investments, it might make more sense to adopt a longer-
term approach and give those savings more chance for growth.
Inflation is the enemy of all savers, but especially of those who
depend on their savings and investments to deliver an income. If
returns don’t keep pace with the rising price of goods and services,
they will be worth less in real terms.
EFFECTS OF INFLATION
By investing some of your portfolio for growth, you can offset
the erosive effects of inflation if you are successful. After all, asset
values normally rise if they perform well or their prospects improve;
although there are never any guarantees when it comes to investing.
Different investment approaches can often perform differently under
the same circumstances. For instance, more ambitious growth-
focused strategies tend to perform more cyclically than certain
income strategies, in the sense that they tend to outperform when
markets are buoyant but underperform when investors are more
pessimistic.
GROWTH-FOCUSED STRATEGIES
Allocating some of your portfolio to higher growth-focused
strategies could therefore be a counterbalance to more sober income-
generating assets, so long as you can accept the risks, which are often
greater when you are pursuing growth. In general, the more risk you
take, the more your investment could rise or fall in value.
ATTITUDE TOWARDS RISK
When investing for someone younger, their investment horizon is
probably more likely to be measured in decades than months and
years. You should therefore be able to take a truly longer-term view
and prioritise growing the value of the pot for the future; ignoring
the inevitable short-term fluctuations in the value of assets or any
income considerations.
Depending on your time horizon and your attitude towards risk,
investment strategies that target capital growth could therefore make
a valuable contribution towards your longer-term financial security
– and possibly that of your family.
ACHIEVING YOUR INVESTMENT GOALS
Whether you are looking to invest for income, growth or a
combination of the two, we’ll provide the professional financial
advice, comprehensive investment solutions and ongoing service to
help you achieve your investment goals.
Please contact us for further information. You can also email me at:
[email protected].
wirrallife.com 27