I am worried about Drawdown risks and losing money

There is no getting away form it there is risk with Drawdown, as an FCA registered adviser we have to shout and scream about the risks associated with investing money. Often this puts many people off and gets them worried but it should be read as just that, a warning.

Of course funds can go down and we all have stories of funds dropping and people losing money, look at Lehman Brothers how safe is my money etc etc.

The reality is people buy high and sell low as they ride the wave of optimism or pessimism, however you look at it. We all have stories of times when we saw that great business opportunity or that great share that if we had it now would have made us millionaires. Personally I held over 11,000 ASOS shares, if I had kept them I would be sitting on a cool £700k at their peak, I doubled my money so I was happy … well sort of. The hardest times for investing is when funds drop and the thought that we need to get out to save our losses. Don’t get me wrong there is a time to quit but more often that not if you stick with it, then you will see long term growth and that’s what we are after.

I always say to clients that we are trying to hit 4-6% growth and work out income from that amount. Looking at this chart it shows where 50% of my clients money is invested and they have all achieved over and above the desired growth rates for the last 5 yrs.

performance

If we go back even further and look at longer term investing then FTSE tracker funds or long term 3 star rated funds have always achieved consistent growth or they wouldn’t be around anymore. My oldest client has been in the same funds for 14 yrs and has seen over 237% growth over that time. Granted he is quite adventurous and when the fund drops it does drop but really we are not talking much more than a 5/6% in a day.

The point is, its often a case of sticking with it and the hardest thing to predict is when is a good time to get in or out of the market, often getting in is determined by retirement or needs so the sooner the better and really based on what we have spoken about I would only usually recommend dropping out of the fund if there is something better that might fit your criteria and we then take that decision very carefully.

Conclusion

Drawdown is safe if you monitor it and that is what we are here to do for you, we keep an eye on things so that if there are big changes we can move things for you, Greece and the Scottish referendum are recent examples where this has been done. We are very confident of achieving a 5% growth net over the long term and hopefully our figures show you this is quite achievable based on our experience. Don’t be afraid of drawdown, embrace the flexibility it offers.

 

 

 

 

 

 

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