Retirement planning – a marathon not a sprint
Written by Paul Dodd on August 27, 2014.
Let’s face it, whatever we are trying to achieve, we all like to see quick results. Whether our aim is to get fit or to get thin, many of us fail in our goals because results aren’t achieved fast enough and we give up. However, as any sporting professional will testify, you don’t turn into a champion overnight. Achieving sporting greatness is, as the old adage goes, a marathon, not a sprint. It takes many years of planning, hard graft and training.
Retirement planning requires a similarly long term outlook. A pension pot is not built up overnight but requires patience with investments building value over a significant period of time – the longer the better. Just as top athletes start young and train for many years, the earlier you start to save for your retirement, the better.
To reach true sporting greatness you have to have a long term goal and focus on that, rather than on short term results. It’s the same with investing for your future. You’re in it for the long haul so you need to set yourself the right pace and keep your eye firmly on your long term goal. With this in mind, chasing returns in the short term is to be avoided and often you need to go against the crowd to get the best long term benefit. Take the example of US stocks, avoided like the plague a few short years ago yet offering the best return in 2013. If you had bought back then with the long term goal in mind you’d be reaping the benefits now.
Training to be a top athlete requires an all-round approach to fitness. A boxer doesn’t just have to be able to throw a decent punch, he needs stamina and strength too, and must work on all these disciplines to reach the top of his game. Likewise, in the financial arena, the key to long term results is to take an all-round approach. Markets are nothing if not wildly volatile and past performance is no indicator of future success, as the graph clearly illustrates. Take equities in emerging markets as an example. In 2007 they were the best performing asset class, generating gains of 37.43%, yet the following year their value plummeted to the bottom of the league with losses of 35.18%, before soaring once again in 2009. In order to balance out these peaks and troughs of individual assets, the best approach is to invest in a diversified portfolio.
Finally, it is worth pointing out that no-one achieves sporting greatness alone. Behind every Andy Murray or Usain Bolt is a highly qualified and experienced trainer who is there to work out the grand plan, encourage, motivate, suss out the competition and constantly reassess the situation to ensure that the athlete is on track to reach their goal.
Similarly, you will benefit from the support of someone experienced and knowledgeable who can offer invaluable independent advice with regard to your investments. Look on your financial advisor as your personal trainer – he or she is there to look at the bigger picture, to help you to focus on the long term goals, to do the research so you don’t have to and to regularly review your investments to ensure that you are on track to achieve your goals. Find a good one and they will assist you on your way to a secure and comfortable retirement.