03 June 2020 - 07:41Most of the research indicates that the prudent approach would be to plan for at least 25 to 30 years. Picture: SUPPLIED/36ONE
We’ve seen a great deal of volatility in equities with the stock market reaching record single-day losses. If you’re invested for the long term and you’re years away from drawing from the money you have invested, you might not be too worried about short-term declines in performance. The smartest thing you can probably do right now is leave your investments, sit back and wait for things to stabilise.
The risk involved in withdrawing money from a volatile portfolio, termed sequence-of-return-risk, is lower when portfolio volatility is lower. The current market capitulation has highlighted the value of having the right mix of portfolios in reducing this type of risk without compromising too much on longer-term growth.
He also chooses to increase the income each year and goes with an increase rate of 6%. The table below summarises what his investment portfolio would be worth on March 31 2020 in nominal terms:When you compare the end values of the income-producing portfolios, the 36ONE SNN QI Hedge Fund outperformed the FTSE/JSE all share index by 8.3% a year. This is higher than the lump sum scenario initially depicted where the 36ONE SNN QI Hedge Fund outperformed the FTSE/JSE all share index by 7.1% a year.