Bulletproof your Retirement Portfolio

As we work towards retirement, the money we invest to one day replace our income is a critical piece. When we get closer to the date it is equally important that we are prepared for the risk of negative financial markets. The key thing to remember is if you have a large loss close to or into retirement it is hard to recover. Especially if you are drawing money and crystalizing losses in the markets. You may have even heard stories about people retiring just before 2008 only to return to work after their stock portfolio had dropped 30%.

The traditional way for retail investors to protect their retirement nest egg was to have stocks, bonds, GIC’s and maybe some real estate. With real estate though, there can be liquidity issues if the money is locked into one property. GIC’s are certainly safe, but after inflation the yield will usually not generate the returns needs nor provide access to the money. Bonds offer some diversification, but they do not protect in all situations. For example, in 2022 the stock market dropped -18.14% (MSCI World) and the bond market dropped -10.3% (FTSE Global Bond Index) at the same time.

So how can retirees protect their retirement assets further while generating the returns they need? If we take a cue from large pension funds and endowments, we can get some ideas. Looking at the CPP for example, they have over 50% of their assets in alternative investments as of 2018. Large endowments at Harvard and Yale have over 70% of their assets in alternatives as of 2012(Prequin Private Debt On-line).

For the vast CPP pension fund they have averaged a solid 8.3% over 10 years and actually increased in 2022 6.3%(cppinvestments.ca) when most markets were negative. This occurred due to their exposure to alternatives or private assets as well as publicly traded assets.

Examples of alternatives would be exposure to real estate, infrastructure as well as private debt and equity in a diversified manner. These assets are not traded every day like stocks or publicly traded assets and therefore do not change based on headlines or market emotion. The net result is a portfolio that is more stable with additional tools to build wealth.

At Bellwether Family Wealth, we specialize in adding these assets for individual investors to lock in their retirement plans. To find out more please contact me for a free consultation on your existing portfolio and a comprehensive financial plan.

Thank You,

Dan Beyaert