100% agree. Tell her to get a first-class plane ticket to Morocco, take a boat cruise around the Med., relax on a Greek island until Winter, then travel first-class to Dubai, then do it all again.she can't take it with her!
Hi Woodsman
I agree with you. She should buy a portfolio of around 5 blue chip shares. I see no reason for getting independent advice on this subject as it's a very standard problem. Independent advice would add nothing and may well cost her in terms of bad advice or high commissions.
PMU said:'If the pensioner had invested in 2002 he /she would have seen their capital reduce to €350,000 and their income reduced to €14,000'
Sorry to disagree with Brendan but I think his advice is wrong.
I think the pensioner by investing in low correlation asset classes via ETFs could achieve a portfolio that would give the required inflation proofed income and capital preseration but that also would have a low volatility, low worst-case loss with a low likelihood of such loss and good recovery. It would be worthwhile paying an adviser to construct such a portfolio.
that also would have ..., low worst-case loss with a low likelihood of such loss and good recovery.
I have learned a lot from people disagreeing with me.
No. It is specific. The OP says the requirement is for €20,000 pa income, and preservation of capital. This, e.g. implies a ‘buy & hold’ portfolio, that will produce a given income with capital preservation; as opposed, e.g. to a ‘withdrawal mode’ portfolio, of which the pensioner would withdraw €20,000 in year 1, and then withdraw this amount index linked each year regardless of overall portfolio performance.Why does she need to go to an advisor to construct such a portfolio? There is nothing specific to her about it.
You should. If the portfolio suffers a 25% loss it needs an annual return in excess of 10% for three years to recover. (It will actually need more as the pensioner is still withdrawing income in this period). So what is the probability that the portfolio will suffer such a loss over the pensioner’s life-span? What is the frequency this will occur? To answer these questions you need some idea of the portfolio’s volatility.I don't think that ETF's are tax efficient for a pensioner, but I am open to correction on that. I would not exchange a 20% or 41% tax hit for some reduction in "volatility".
Volatility tends to be measured on an annual basis, and I don't think it's particularly relevant when we are looking at 20 year horizon.
I would love to invest in such a porfolio. Low losses, high returns and good recovery?
My gut feeling is that going to an investment advisor is risky.
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