A RECENT email from a reader highlights the challenges facing anybody who tries to invest for their retirement.
He told me that he and his wife had their super in a balanced fund but then got very nervous when the balance fell because of the Greek crisis.
To protect themselves against further losses he switched the entire balance to cash, on the basis that he would return to more growth orientated assets when the market returned to "normal".
Of course, we all know what happened - the markets have shown great returns in the last couple of years, while the money he kept in cash is now "stagnating".
I've been in the investment business for more than 50 years and still don't know what "normal" means. However, I do know that nobody can consistently and accurately forecast the direction of markets. There are always profits of gloom amongst us, but they are wrong more times than they are right.
The way out is to sit down with your adviser and decide on an asset allocation that fits your goals and your risk profile, and then resolve to stick with that regardless of what markets do on a day-to-day basis.
A person aged 50 now may well have 45 years of living and investing ahead of them - only share based investments have the potential to give them the returns they are going to need. This is why I have always recommended that people get comfortable with shares at an early an age as possible.
It's also important to meet with your adviser at least once a year, and adjust your strategies to take advantage of the latest investment products available.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: email@example.com.
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