Constructing a retirement portfolio in a low return world
Portfolio Manager Sydney, Australia
A 'bucketing' approach
In retirement these categories become most relevant because your clients no longer have a regular salary to fund those goals. Therefore in order to ensure that your clients’ superannuation savings can go the distance and help them live the lifestyle they want, it can be wise to invest their money in solutions that aim to meet those goals.
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Essential needs
The majority of people’s money is generally focused around this goal. Investment solutions for these needs will aim to deliver a predictable, regular, sustainable income stream that is expected to rise with inflation over time.
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Lifestyle wants
Helping your clients live the life they want.
For many clients, maintaining their lifestyle in retirement is very important. Investment solutions for these goals will generally aim to grow people’s wealth steadily over time while looking to soften the impact of severe market falls.
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Legacy aspirations
Helping your clients leave the legacy that they want.
With their essential needs already met, people may look to maximise the growth of any money they have set aside. Investment solutions for these goals will be higher growth solutions and look to grow people’s money over the long term.
How do each of the buckets fit together?
In his 1943 paper ‘A Theory of Human Motivation’, Abraham Maslow presented a theory around a hierarchy of needs and he looked at how these needs influence human motivation. Maslow’s Hierarchy of Needs states that the most fundamental needs, related to survival itself, are to be addressed first before any other needs can be satisfied.
The goals-based approach to investing is based on this thinking and the three buckets of goals fit together in a similar hierarchy. The most important and fundamental needs are at the base as they are needs that are to be met first, and the aspirational goals are towards the top.
Portfolio Manager Sydney, Australia
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Important notes
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