Unpredictable stock markets are a challenge for ordinary investors , especially if they are around retirement and plan to bolster their income by taking cash lump sums from their savings.
The Covid-19 crisis has set off a rollercoaster ride of share prices that soar one day and then plunge the next.
If you are managing your retirement savings, you need steady nerves and a long-term plan to make the best of your cash.
Ultimately, most people are at different stages of their financial journey and have their own priorities and goals, so a one-size fits all solution to investing during the coronavirus outbreak is not much good.
Checklist for drawdown investors
However, six tips are worth bearing in mind.
- Keep to your plans – Hopefully, coronavirus is a short-term blip for long term savings and the markets will eventually recover t the place where they were a few weeks ago. If anything, the global situation shows how important it is to secure an income that pays the bills while the economic mess has time to mend.
- This is that rainy day you were saving for – If you have a cash buffer, then there’s no time like the present to draw the money to cover your day-today bills. It’s not the best strategy, but will stop you building up debt and financial problems when the world returns to normal.
- Think before selling investments – Trading investments when the markets are so low means little chance of making up the losses. You also create pressure as if investments grow slower than your spending rate without any replacement, your retirement savings will deplete sooner than expected.
- The balancing act – Do you need to rebalance your portfolio or sit tight? Switching investments is an option, but takes courage. Just move a little at a time rather than big chunks of money, but staying put for now is probably the best advice.
- Annuities are always an option – Annuities are not popular but do provide a guaranteed lifetime income, even if the pay rates are low. They remove uncertainty at a price not everyone is willing to pay.
- You’ve got the power, so use it – The virus can strike anyone, so sort out who can access your finances by granting a power of attorney if you are laid low