There are two keys to a successful long term Income withdrawal / Income drawdown fund

• Investment Growth
• Investment yield

Most of the return is likely to come from investment growth but yield is still important.  Why?  Because yield is more consistant and reliable.  In a bad year the fund might lose value but the yield will still be there to fund income.  Over the long term losses are usually recovered and if the yield is sufficient to fund the income being drawn there is no long-term damage.

See our page "The Importance of Yield"

It is therefore a mistake to choose aggresive growth funds unless you are taking no income from the fund.  Aggressive growth funds tend to have little or no yield.

For most people the ideal portfolio is an income and growth portfolio.  The investments provide both a reasonable yield to fund income and also long-term growth.

Financial Adviser Hertfordshire recommends you take advice from an Indpendent Financial Adviser who will know how to construct the best portfolio that matches your attitude to risk and also your investment objective.

Investment Risk

 If you are not prepared to take some investment risk then Income Withdrawal / Income Drawdown is unlikely to be suitable for you.  Low risk funds are unlikely to deliver the necessary returns and you could end up with less than an annuity would have provided.

To be viable over the long term, an Income Withdrawal / Income Drawdown fund should be invested with a degree of investment risk.  The following funds are suitable

• Equity funds that invest in the shares of companies
• Corporate bond funds that invest in company loan stock
• Gilt funds
• Property funds

 A Balanced Portfolio

Do not put all of your eggs in one basket.  Diversify your portfolio.  Rather than trying to find one thing that achieves your objectives, find as many as possible and spread your fund accross them all.  This spreads the risk and limits the chances that your fund will suffer if something goes wrong.

Review

At least once a year consult with your Independent Financial Adviser.  Ask him to review your funds to see if they are all performing as they were supposed to.  Try to find the best fund in each market or sector so that you get the best possible performance.

Be Realistic

You should aim for your fund to outperform the base rate of interest by between two and four percent per annum.  If you acheive this you are doing well although in practice it is often possible to do much better. 

Look for constancy

Rather than chase the highest possible returns in any one year, try to get a good return every year.  Look for funds that will deliver good returns year in year out.  This will give you growth on top of growth and the benefit of a compound return that over time can deliver substantial long term returns.