Should you be incorporating niche investments in your retirement plan?
The Telegraph has reported that as many as two million over-50s who have left the workforce are at risk of facing a cash crunch after retirement. Continue reading this article to discover how diversifying your investment portfolio with alternative investments could help ensure a comfortable retirement.
A report by the think tank, Phoenix Insights, conveyed “significant concerns about the ability of many… to sustain a decent standard of living in retirement”. Sky-rocketing inflation has led to cash savings not stretching as far as they once did. This has led many early retirees to be forced back into the workforce to make ends meet. At the same time, poor performance in stock markets has impacted investment portfolios causing people to lose significant portions of their retirement nest eggs. Alternative investments such as commodities, fine art and classic cars offer annualised returns that out-perform inflation, in addition to this, alternative markets are uncorrelated from stock markets and as such are immune to the volatility that stock market investments are subject to.
A Times article filled with a range of advice for those planning to retire early makes three points that anyone should consider if they are planning on leaving the workplace early:
The most important factor early retirees should consider is inflation. With inflation rates rising, the purchasing power of your savings reduces meaning your savings may not last as long as they once would. From 1988 to 2018, the price of food inflated by over 100%, if we were to see this same rate of inflation in the next thirty years average annual food spend in the UK could exceed £10,000. For this reason, it is important that you make investments that have potential returns that can be greater than the rate of inflation.
Unforeseen Life Events
Murphy’s First Law dictates that anything that can go wrong will go wrong. Everyone is aware of the capability of life to throw up unexpected obstacles. Fines, unexpected bills, repairs these problems can come up at any point in our lives. Fortunately, when we are working, we are able to recoup our losses and continue earning money but those in retirement are forced to rely on a fixed amount of money to settle these issues which can be a massive burden on your finances. Having an alternative investment portfolio allows your retirement nest egg to continue to grow with minimal involvement throughout your retirement providing security when life happens.
Less Time for Growth
Retiring early also means you have less time to build your investment portfolio or your retirement funds. In this case, it is important that any investments made can make significant returns on your investment. Usually in the stock market, the greater the returns, the greater the risk. Alternative markets offer a very healthy return-to-volatility ratio as can be seen in the 2020 Credit Suisse Collectibles Report which is to say that alternative investments such as Fine Art offer greater returns with lower volatility which is an ideal position for your investments.
In conclusion, diversifying your existing portfolio by making alternative investments such as Fine Art or Commodities could ensure financial security for your later years. You can find out more of the benefits of alternative investments on our blog or alternatively download our free guide below.
Trust De Pointe to guide you through the complexities of the alternative investment market. Contact us today to learn more about our services and how we can help you achieve your investment objectives.