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INVESTMENTS
How important are my
investment decisions to
by MIKE LARBALESTIER,
MANAGING DIRECTOR,
Rossborough Financial Services Limited
my financial well being?
“Financial well being” is probably something we all seek. you are going to have to accept some risk, but you
So what exactly is it? Is the figure you are aiming at should be pleased with the ultimate results. It is
based on any calculation or is it a stab in the dark? I interesting to note that despite being a period that
would suggest that in most cases it’s just a large experienced the worst market falls in a generation, over
sounding number that you believe will ultimately allow the last 10 years an investment in the stockmarket would
you to live that comfortable life that you deserve. have more than doubled.
For example, some feel that if they could accumulate In some ways, retirement planning is the ideal long term
£100,000 or so before retirement then they won’t have a investment. You put something away and add to it on a
financial worry again in their lives. Whilst this is a regular basis and largely ignore it, blindly hoping that it
reasonable amount of money, and no mean feat to save, it will grow into a large sum sufficient to fund a fun-
is unlikely to deliver the lifestyle that some might packed retirement. Although this means that you are not
imagine. It might produce an income of £5,000 which is overly worried by every sharp move down in the
probably not your picture of financial well being! stockmarket, it could be to your advantage to check it out
from time to time. How our retirement pot is invested
Another way of looking at this is to think how you will undoubtedly affect our financial well being at
would feel if I gave you £100,000 today. You’d probably retirement and so I would strongly encourage you to
feel quite well off. If I said I’d give you £5,000 per look at where the money is being invested. You might
annum you would appreciate it but it wouldn’t call it a pension but it is a long term investment decision
necessarily make a massive difference to your lifestyle. that you are making and if you are fortunate enough to
Now imagine that I give you the £5,000 per annum but have a pension and able to influence how it is invested
only on the condition is that you don’t work again. How then you should find out more.
would your financial position feel then? Welcome to
retirement reality. To assist our clients we have a calculator that provides
them with a retirement “reality check”. We put in the
Often it is too easy to think that investment decisions are relevant numbers and the calculator tells them what the
purely for the well-heeled. Many are saving some income from their pension might be, but in “today’s
money in the bank and maybe have a personal pension - money”, i.e. allowing for inflation. Not only is it a real
so what has investment to do with their future? Firstly, shock to the system in virtually every case but it is also a
accumulating cash in the bank and not investing it sobering wake-up call to the fact that unless they make
should be seen as a risk to your future financial well some changes their feeling of well being at retirement
being and secondly, your pension is an investment and may not be exactly how they hoped it would be.
you will probably have a say in how and where it’s
invested. Fortunately, the calculator does offer some hope. Even if
you cannot contemplate increasing your contributions
Where investment decisions really come into their own is you can adjust how your money is invested. So, if you
over the longer term, say 10 years plus but ideally 15 to are young enough you could increase the growth
20 years. For example, it would not be unreasonable to potential of your pension and this could translate into a
expect a fund invested in the stockmarket to grow at 7% larger retirement pot and therefore a greater income, for
per annum on average. This translates into a doubling of no more outlay. This should then be reviewed as you
your investment over 10 years. Alternatively you could approach retirement or your circumstances change.
leave it in the bank and, based on current rates, you
might be lucky enough to achieve half of that. I would encourage you to re-evaluate what you believe
“financial well being” actually means for you and then
Cash is described as a “risk free” investment and so by go and talk to someone who might be able to help you
definition, as soon as you try and improve your return achieve it.
20/20 sixteen
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