This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
Four important investment tips to follow if you’re on the road to retirement
20th August 2024


Last month, you may have read our insights into how cashflow modelling works and why this technology can be so instructive when forming a retirement plan.
Investing is an important part of creating wealth for retirement, but for many, it’s hard to know where to start when building a portfolio. While your pension contributions will usually be invested on your behalf by your provider, it may be constructive to invest outside of your pension, too, in the years leading up to your retirement.
If you can relate to these concerns, read on to find out four important investment tips if you’re on the road to retirement.
- Ask yourself “why”
Before we dive into the nitty gritty of investing behaviours that could serve you on the approach to retirement, first, it could help to step back and ask yourself why you’re investing.
Even if you are 20 years away from retiring, you likely have goals you’d like to complete when you get there. These might range from concrete goals, like retiring at a certain age, to more holistic goals, like travelling or spending more time with your children and grandchildren.
Setting these goals ahead of time could:
- Inform how and when you invest
- Motivate you to invest your money in a more disciplined fashion
- Prevent you from cashing in portions of your portfolio on a whim.
Once you have established the goals that matter most, you can begin to build an investment portfolio geared specifically towards them.
- Start as early as you can
If you’re in your peak career years, retirement might seem like a distant dream. Existing as an abstract concept in your mind, it may not play a major part in your investment decisions at the moment.
That is why goal setting is so crucial – it might make retirement seem “real” to you and incentivise you to start investing now, rather than later.
Fidelity offers a numerical example of the amazing difference early investing can make.
Petra invests £1,000 a year from age 25, and Jonathan invests the same amount a year starting when he’s 35. Petra stops investing at 55, whereas Jonathan carries on until he’s 65. Yet when Petra reaches 65, she will have around £121,000, whereas Jonathan will have little more than £74,000.
Although both people in this example saved exactly the same amount of money over a 30-year period, Petra’s 10-year head start gave her much more competitive returns.
This may prove that although there is no guarantee of a return on your investments, by starting as early as possible, you could find yourself more financially comfortable when you retire.
- Diversify
American investor and philanthropist, John Bogle, once said: “Don’t search for the needle in the haystack – buy the haystack!”
“Searching for the needle in the haystack” by only buying one type of asset that you believe will generate the most returns, leaves your money exposed to greater risk. This is because your entire portfolio could see losses if your chosen holding experiences volatility due to circumstances outside of your control.
During Covid-19, for instance, demand for oil and gas plummeted, with some suppliers even paying vendors to take oil off their hands in April 2020. If your whole portfolio had been invested in oil and gas, this could have been a catastrophic moment – and may have led to serious distress for you and your family.
While oil and gas prices recovered by 2022, if you had been planning to retire in 2020, you may have had to delay this date due to the losses your portfolio would have been experiencing.
If you had diversified, though, your portfolio may have been able to ride out the shocks to this particular asset class, as gains in other areas may have evened out the losses experienced in the oil and gas sector.
What’s more, owning several types of asset as part of a wider portfolio gives you a greater likelihood of owning the next “rising star” on the stock market. For instance, if you had bought shares in a US tracker fund in 2022, your portfolio would have benefited from the exponential success of chip-making company, Nvidia, in 2023.
That’s why we often recommend “buying the haystack” when you’re investing for a prosperous retirement. Working with a bespoke Financial Planner could ensure you’re well diversified as you continue to build investment wealth.
- Form a strategy with a Financial Planner
With the cost of retirement increasing in the last few years, you might feel intimidated by the task of forming a robust portfolio that can help to fund your retirement.
As Financial Planners, our job is to help you achieve your goals by forming a bespoke strategy aimed specifically towards them. We’ll spend time talking to you about what you want from retirement – be it an early retirement age, giving financial gifts to your children and grandchildren, or ticking well-earned items off your bucket list. Then, we’ll help you design a portfolio geared towards these goals.
To learn more about preparing for retirement, email us at enquiries@pen-life.co.uk, or call 01904 661140.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only. All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority (FCA) does not regulate cashflow modelling.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Category: Retirement