This can give better shelter to your overall pension value during market falls and help provide more consistent performance. Different types of assets, markets and sectors perform better at different times. And it couldn’t be more relevant when it comes your portfolio.ĭepending on your own risk profile, a diverse and balanced portfolio might include a mixture of different asset types, like cash, funds, bonds and shares. We’ve all heard the expression ‘don’t put all your eggs in one basket’. The main reason to diversify your investments is to help reduce risk. It’s no secret that diversification is a cornerstone of successful investing. Remember dividends aren’t guaranteed and major events, like the coronavirus pandemic, can lead to some companies suspending, delaying or scrapping dividend payments. You could think about building up cash over time by gathering together the income generated from your investments, rather than re-investing it. When you’re building a cash buffer, you don’t have to sell your investments to do so. if you’re taking the natural yield (the income from your investments) or if you need to draw from capital.Īlthough you can hold both cash and investments in a drawdown account, the extra cash doesn’t necessarily have to be held in your pension - just as long as it’s easily accessible for when you need it. You could also think about keeping extra cash to fall back on, and how much you hold will probably depend on how you’re taking money from your pension i.e.
Investors should also have some cash readily available for planned income (at least 2 years’ worth, or more preferably). If the stock market crashes, the cash can act as a safety net and help to safeguard your income levels.Īs a general rule, everyone should hold at least 3-6 months’ worth of expenses in easily accessible cash, most likely in a bank or building society savings account. Having a cash buffer can help shelter you against falling markets. But you also need to make sure you have enough cash to cover your essential spending as well as any planned income for the immediate and short term. We think it’s always a good idea to set some money aside for a rainy day. If you are unsure if a course of action is right for you, please seek advice. This article and tools aren’t personal advice. We share our three top tips to help reduce risk in drawdown. Unlike cash, all investments and the income they produce can go up and down in value, so although there’s the potential for growth and income, you could get back less than you invest.īut with some careful planning and regular reviews, you can reduce the impact of any unwanted results. But, the value of your pension pot depends on the investments you choose and market performance. If you’re planning to move into drawdown, or you’re already a drawdown investor, recent uncertainty might have left you less willing to take on risk.ĭrawdown offers great flexibility, the potential of an increasing income and the chance to pass on more of your pension when you die.
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