The business of retirement portfolios
Retirement portfolios are like small businesses. They generate income from their assets, pay all kinds of bills, and make income payments to their beneficiaries. Some perform well, while others languish, depending on their strategy and the broader environment.
Like small businesses, retirement portfolios come in all shapes and sizes. Some are conservative, highly diversified, and really quite boring. Others are geared to the gills, invested fully in mining town rentals bought sight unseen, or neck-deep in crypto and micro-cap stocks.
Reviewing your retirement portfolio
From a financial planning perspective, the most important ‘health checks’ for your retirement portfolio are:
#1 Do your investments align with your risk profile?
#2 Is there a sensible amount of diversification?
#3 Is there sufficient cashflow and liquidity to fund ongoing and unexpected expenses, as well as pension payments?
#4 Are your assets “high quality” and priced sensibly?
#5 Is your portfolio aligned with the times and the broader market environment?
2025: A year of change
2025 looks like an interesting year for small businesses around the country. Tough operating environments have started to weed out unsustainable businesses, seeing a rise in insolvencies and more practical decision-making (particularly compared to Covid times). But we haven’t seen the serious recession that many feared, and Australian consumer confidence is on the rise again following the lows of last year. Many believe that the re-election of Donald Trump in the USA will herald a new era of prosperity for ‘main street’ business, and that this will have ripple effects around the world.
This macroeconomic backdrop flows through to retirement portfolios directly. It influences the type of investments that are likely to perform well and those that will struggle. But it also applies more practically to the ongoing management of retirement investments, particularly as it relates to cashflow and liquidity.
Planning for the unexpected
Like any good small business owner, investors need to have contingency plans for unexpected setbacks and periods of underperformance. “Hope for the best but plan for the worst” comes to mind in this instance. While we’ve enjoyed strong investment returns over the last couple of years, the year ahead promises to take many unexpected turns. Point #3 in the checklist above is a key consideration in our view.
Ready to review your retirement portfolio?
If you would like to book a complimentary appointment with one of our Financial Advisers to review your retirement portfolio, please contact us today.