Double Dip or Double Security?

Recently a client approached me concerned about the speculation of a double dip recession in the US and the potential consequences for his retirement income.

John has a balanced investment strategy based on the annual expenses he envisages for his family over the short to medium term. Specifically John has a cash deposit earning interest at current levels, investment’s in managed balanced funds, a smaller holding in Australian bonds and a commercial property investment via his superannuation fund. All of which are returning an acceptable income to meet John’s lifestyle expenses.

We discussed the Australian economy moving ahead at growth and inflation levels as predicted by the Reserve Bank. That Australia’s interest rates are higher than those of the OECD meaning that if required we have more room to adjust than other economies including the US. Our export earnings from Iron Ore and Coal alone are helping to drive the economy and even if the US does falter our main trading partner China is expected to continue buying Australia resources in the medium term. Also as John’s investments are exposed to what happens in Australia with little international exposure his strategy is sound. In terms of investment strategies the three major facets of Quality,

Value and Time are worth remembering. Over recent time’s reporting of the share market and interest rates is not unlike that of a sporting event, when the reality is that rarely do we see significant returns on investments over the short term, although at times we could be expected to believe that if Rome wasn’t built in a day it could or should have been!

In retirement or approaching retirement our investment expectations should be based on maintaining an income stream that suits our lifestyle whilst preserving the level of capital upon which those earnings are based. Incidentally John had forgotten that for added security we wrapped his investments (not the property) in a guarantee so that whatever happens, his capital base would be preserved. John left the office a happy man and I suggest you consider reviewing your strategy with your financial adviser. Too much concern should not be part of your investment strategy.

This editorial provides general information only.