Investing in your 50s

Sam Slator 06/07/2023 in Multi-Asset

Your 50s is when retirement looms on the horizon. Whether your dream is a caravan in the Cotswolds or a villa in Tuscany, this is the time when your dreams can start to take shape. But where should you be focusing your attention during this decade? How can you maximise returns without risking everything you’ve put away?

Here we take a look at what your priorities should be, the key options to bear in mind, and some investment funds that could be worth considering.

Your situation

Not everyone will be in the same position at this stage. Some will have been in decent, well-paying jobs for decades and managed to build up an impressive nest egg. However, others may have been in lower paying work or endured punishing divorces and been left with severely depleted finances after splitting their assets.

Your longer term goals must always play a part in your decision-making process. What do you want out of life? How much is this likely to cost? Planning is absolutely critical.

First considerations

The usual rules still apply. Clear outstanding debts before investing as the interest rates you’re likely to be paying will almost always outweigh what you can potentially earn. Remember to keep some money in an easy access account – either a traditional bank savings account or cash individual savings account – in case of emergency.

The plan

The natural thing to do as you get closer to retirement is to de-risk, but other factors, including the size of your pension pot, will come into play.

You may not have anywhere near enough saved for later life. If this is the case, you’ll have to be ruthless in your budgeting to ensure you can start putting away more each month. Similarly, you could be feeling the impact of stock market volatility. For example, you’ve just entered your 50s and a gruelling bear market has wiped out half your portfolio’s value. If that’s the case, you can’t start de-risking because the likely returns won’t be enough for you to recover lost ground. This means you will probably need to be adding more risk for a few years.

However, if your finances are in pretty good shape and unaffected by such scenarios, you may still want to edge down a de-risking route by moving more of your assets from growth to income funds. The latter are generally less volatile than growth portfolios. In addition, you may consider adding a little bit more to bonds or alternative assets.

Investment suggestions

Global equity income funds, insurance equities, strategic bond funds or absolute return funds might all be worth a look at this stage in your investing life. Remember, you can move further out of equities and into other, less potentially volatile assets as the decade progresses, if you decide this approach better meets your needs.

Here we highlight four portfolios that are worth considering.

TM Redwheel Global Equity Income

This fund’s aim is to provide a combination of income and long term capital growth, a timeline that it defines as being five years. Nick Clay is the manager at the helm, and he focuses on three factors: finding sustainable business models; ensuring they’re at good valuations; and trading with a strong buy/sell discipline. Most of this portfolio’s assets will be in a concentrated portfolio of global companies. It will also be broadly diversified in terms of sectors.

Polar Capital Global Insurance

The concept behind investing in this fund is simple: Everyone needs insurance! This means it’s a portfolio with very good defensive characteristics. The fund, managed by Nick Martin, provides exposure to non-life insurance companies, which we believe is a specialist and often undervalued sector. We like the fact Nick has spent many years working in these markets, while the fund’s consistent track record provides a good return profile for portfolio diversification.

Jupiter Strategic Bond

This is a great fund for those wanting bond exposure. It’s a flexible, go-anywhere portfolio that gives the manager considerable freedom to exploit opportunities across the fixed income spectrum. Ariel Bezalel has run the fund since its launch in 2008. His starting point is conducting macroeconomic research and analysing global monetary policy. He and his team will then decide which bonds look most attractive. They will also carry out extensive company research at this stage. Ariel’s emphasis on controlling the downside has helped the fund to post some exceptional risk-adjusted returns. It also helps set it apart from its peers.

Janus Henderson Absolute Return

Our final suggestion is a long/short equity fund that aims to deliver a positive absolute return over rolling 12-month periods. The managers, Ben Wallace and Luke Newman, hunt out stocks that they expect to either exceed expectations or underperform significantly. In the case of the latter, they will ‘short’ these names. Generally, two thirds of the portfolio will be in shorter-term tactical ideas, where an earnings surprise could be imminent. The remainder will be in core holdings. Although the Janus Henderson Absolute Return fund was launched in 2009, the strategy and the team have a much longer track record running another identical mandate.

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.