Onside Issue 5 - 29
BREXIT FOR INVESTORS
- TIME TO GET ACTIVE
Seneca Investment Managers' hard hitting, deep thinking Chief
Investment Officer, Peter Elston, has been weighing up the
potential effects of Brexit on investment returns.
While it is far from clear what its long term impact will be, Britain's vote
to leave the EU has shone a light on the growth problems in general that
face the global economy. Indeed, global growth has been disappointing
for some time now, having never really regained the levels seen prior to
the global financial crisis. From 2003 to 2007, economic growth for the
largest developed and emerging economies averaged 3.9%. Since 2011, it
has averaged just 1.6%. The reasons for this are complex, but it is certainly
possible that lower growth is here to stay.
Lower growth of course means that one should expect lower investment
returns. Add in rising longevity and for savers you have a toxic combination.
In days gone by one may have only needed to make a savings pot last 10
years and could have expected real returns from a typical balanced fund
in the order of 5% per annum. This would have equated to an annual
withdrawal of £12,950 (rising with inflation over the 10 years) on a pot of
£100,000 (see table).
Initial portfolio value
£100,000
2%
Annual withdrawal
No. years savings
pot to last
Real return achieved
4%
3%
5%
10
£11,133
£11,723
£12,329
£12,950
15
£7,783
£8,377
£8,994
£9,634
20
£6,116
£6,722
£7,358
£8,024
25
£5,122
£5,743
£6,401
£7,095
30
£4,465
£5,102
£5,783
£6,505
If returns fall to 2% and you need your pot to last 30 years, this figure falls
to £4,465. (These numbers assume the said investment return is achieved
each and every year. In reality returns will vary from year to year, often
considerably).
Two Options
ONSIDE WINTER 2016 |
There are two ways to deal with this problem. Either you reduce your
spending in retirement or you try to increase your investment returns. If
you opt for the latter, you'll have to take some investment decisions that
you may not be comfortable with.
29
Table of Contents for the Digital Edition of Onside Issue 5
Contents
Onside Issue 5 - Cover1
Onside Issue 5 - 2
Onside Issue 5 - Contents
Onside Issue 5 - 4
Onside Issue 5 - 5
Onside Issue 5 - 6
Onside Issue 5 - 7
Onside Issue 5 - 8
Onside Issue 5 - 9
Onside Issue 5 - 10
Onside Issue 5 - 11
Onside Issue 5 - 12
Onside Issue 5 - 13
Onside Issue 5 - 14
Onside Issue 5 - 15
Onside Issue 5 - 16
Onside Issue 5 - 17
Onside Issue 5 - 18
Onside Issue 5 - 19
Onside Issue 5 - 20
Onside Issue 5 - 21
Onside Issue 5 - 22
Onside Issue 5 - 23
Onside Issue 5 - 24
Onside Issue 5 - 25
Onside Issue 5 - 26
Onside Issue 5 - 27
Onside Issue 5 - 28
Onside Issue 5 - 29
Onside Issue 5 - 30
Onside Issue 5 - 31
Onside Issue 5 - 32
Onside Issue 5 - 33
Onside Issue 5 - 34
Onside Issue 5 - 35
Onside Issue 5 - 36
Onside Issue 5 - 37
Onside Issue 5 - 38
Onside Issue 5 - 39
Onside Issue 5 - 40
Onside Issue 5 - 41
Onside Issue 5 - 42
Onside Issue 5 - 43
Onside Issue 5 - 44
Onside Issue 5 - 45
Onside Issue 5 - 46
Onside Issue 5 - 47
Onside Issue 5 - 48
Onside Issue 5 - 49
Onside Issue 5 - 50
Onside Issue 5 - 51
Onside Issue 5 - 52
Onside Issue 5 - 53
Onside Issue 5 - 54
Onside Issue 5 - Cover3
Onside Issue 5 - Cover4
https://www.nxtbookmedia.com