Adjusting for Loss – why Risk vs. Reward aren’t the only calculations relevant to your retirement planning.

A recent piece of market research carried out by CoreData has highlighted a trend in younger investors which industry experts have labelled ‘deeply concerning’. The study of 400 retail investors found that, of its ‘millennial’ (aged between 25 and 40) respondents, 40% would add cryptocurrencies to their pension investment portfolio given the chance.

Of course, Cryptocurrencies are big news at the moment – Bitcoin and Dogecoin are both often in the financial headlines, both due to stories of extreme growth as well as large swings – it’s a highly volatile but potentially lucrative market.

That volatility and the fact that cryptocurrencies remain – at this point – unregulated, mean that they are not directly available to pension funds, and the Financial Conduct Authority has already expressed concern at the risks posed to retail investors by them.

With a labour force very well aware of the disadvantages it faces compared with previous generations – the lack of final salary pensions, the depressed nature of a market which has yet to fully recover from the 2008 crash and which is currently troubled by the ongoing Covid crisis – it’s no wonder that savers, especially millennials, would be looking for a potentially fast-growing asset, especially a countercultural one like cryptocurrency.

However, while you might think that your attitude to risk is the only thing that matters when planning your investment strategy, you also need to think about the equally important capacity for loss, also known as financial resilience.

At Seymour, we take all of our clients through a comprehensive risk-assessment process, which examines both these elements and allows clients to break down their investment strategy into appropriate parts and assess the risks that they are prepared to take for each of them. If, for example you were saving for a house deposit, to buy in the next few years, then a more stable and cautious investment route would be recommended for the relevant funds. When looking at saving for a pension, then you may have as long as thirty years before the funds can be accessed, and can perhaps therefore afford to take a riskier approach to the investments you choose.

Most important of all, though, is the assistance of an adviser who can not only identify these different elements to your portfolio, but assist you in navigating the best investment choices to make for each one.

We’re not here to nanny you, or to tell you that something shouldn’t be done, but to empower you in making financial decisions by helping you to identify your exact comfort and ability to absorb losses, and use that information to make the most efficient and profitable decisions possible for your own future.