This post is specifically aimed at our clients who are retired and drawing an income from their portfolio.
It's been a good time to be an investor over the last five years, but at Steadyhand we've been playing a cautionary tune of late. As we explain in our Current Thinking on the Home Page, valuations are getting stretched in the bond and stock markets. Clients should review their portfolios and make sure the asset mix is still in line with their long-term targets.
For our retired clients, re-balancing will likely mean topping up their spending or cash reserves. As a reminder, many clients have carved off a portion of their portfolio to pay themselves a monthly salary. The reserve is generally kept in our Savings Fund or a High-interest savings account (sic) at the bank. By doing this, the clients can pursue a longer-term asset mix with the rest of their portfolio. They know it will fluctuate in value, but they can let it ride because they have money set aside to live off of.
The size of the reserve is determined by multiplying the monthly cash requirement (after factoring in other sources of income) by a suitable number of months. The general range used by our clients is 12 to 24 months, but each situation is different.
With five years of good markets behind us and valuations where they are, we would recommend that you re-balance back up to the top end of your range (24 months in the example above). It's a hard thing to do when markets are roaring skyward, but it's what steadyhanding is all about.
If you'd like to talk about your portfolio, don't hesitate to call us at 1-888-888-3147.