---
title: Are you investing too conservatively?
description: In this post we'll look at why your investment strategy shouldn't end at retirement and the dangers of thinking too short term.
image: https://www.isaco.co.uk/hs-fs/file-19254297-jpg/images/the_dangers_of_investing_to_conservatively.jpg
---

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# Are you investing too conservatively?

Posted by [Stephen Sutherland](https://www.isaco.co.uk/blog/author/stephen-sutherland) on Sat, Feb 02, 2013 @ 01:30 PM

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![describe the image](https://www.isaco.co.uk/hs-fs/file-19254297-jpg/images/the_dangers_of_investing_to_conservatively.jpg)In this [series of posts](https://web.isaco.co.uk/blog/?Tag=Investment+mistakes&Preview=true) we've been looking at some mistakes that fund investors often make. By avoiding these, you'll give yourself a much better chance of achieving your financial goals.

In our [last post](https://web.isaco.co.uk/blog/bid/170370/Is-your-fund-investment-strategy-flawed?Preview=true) we discussed how concentrating too much on fundementals and following a flawed 'buy and hold' investment strategy can undermine an investor's returns. In this post, we'll look at the last of seven common investment mistakes that we're highlighting in this series, which is investing too conservatively later in life.

If you would like to know more, please just download our latest free report, [The 7 Biggest Mistakes Fund Investors Make](https://web.isaco.co.uk/7-biggest-mistakes-fund-investors-make).

## Your investment strategy shouldn't end at retirement

Most investors understand that growth funds are a great and appropriate vehicle if they have a long time to retirement. However, many investors in their late 50s and 60s – approaching retirement or already in it – have been coached by media and industry professionals to think about their investing time horizons in a way that, in our view, is all wrong and one of the most frequently made investing mistakes. These people naturally think that their investing time horizon ends when they either retire, stop contributing to their retirement funds, or start taking cash regularly from their portfolio. They mistakenly think that’s when they should reduce most, if not all volatility risk and start thinking ultra conservative.

In our view, this can frequently lead to an unnecessary and sometimes serious reduction of quality of life later on. Why? People live longer than ever now, yet many invest, by and large, like they expect to die at age 70. According to the Office of National Statistics, the average 65 year old male will live until they are 83 but some 65 year old men will beat this average and live longer. What this means is that if you’re 65 years old or approaching 65, our suggestion is to adopt a long-time investment horizon, especially if you come from a long living family and are in good health. Many investors approaching their retirement mistakenly think reducing risk is smart by moving out of equities and into bonds and cash instruments.

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## The dangers of thinking too short term

It’s true that having an ISA or SIPP portfolio of gilts and cash won’t be as volatile, but volatility risk is just one kind of risk. In a 2010 poll conducted by Allianz Life Insurance Co. in North America of people aged 44 to 75 found that more than three in five (61%) said they fear depleting their assets more than they fear dying.  By thinking too short-term, many investors approaching retirement invest too conservatively. It can mean that they get poor returns, fail to stay ahead of inflation and, as the years pass by, their retirement pot slowly but surely gets smaller and smaller. It’s a big gamble to believe that you and your spouse will be just average and live another 10 years – then find out you're abnormally healthy, live another 20 or 30 years and run out of money after 10.

Plus, it's later in life that you'll want the additional comforts money can buy. Seen that way, investing too conservatively could be seen as high risk. If you are approaching or in retirement and you extend your investment time horizon, you may then decide to take on additional risk by investing in more adventurous funds – funds that have the potential for attractive long-term returns. Smart investors use tax wrappers such as ISAs and SIPPs to further boost their returns and pay less tax. Outperforming the market over the long-term may be extremely difficult to achieve. However, it is possible. When an investor is successful in ‘beating the market’, it helps them achieve higher returns and reduces the risk of running out of capital later in life.

As always, if you have any questions or thoughts on the points I've covered in this post, please leave a comment below or connect with us [@ISACO_](http://www.twitter.com/ISACO_) on Twitter.

## About ISACO

ISACO is a specialist in ISA and SIPP Investment and the pioneer of ‘Shadow Investment’, a simple way to grow your ISA and SIPP. Together with our clients, we have £57 million actively invested in ISAs and pensions*. 

Our personal investment service allows you to look over our shoulder and buy into exactly the same funds as we are buying. These are investment funds that we personally own and so you can be assured that they are good quality. We are proud to say that by ‘shadowing’ us, our clients have made an annual return of 12.5% per year over the last four years** versus the FTSE 100’s 7.4%. 

We currently have close to 400 carefully selected clients. Most of them have over £100,000 actively invested and the majority are DIY investors such as business owners, self-employed professionals and corporate executives. We also have clients from the financial services sector such as IFAs, wealth managers and fund managers. ISACO Ltd is authorised and regulated by the Financial Services Authority (FSA). Our firm reference number is 525147.

*15th November 2012: Internal estimation of total ISA and pension assets owned by ISACO Investment Team and ISACO premium clients.   
**(31st December 2008 - 31st December 2012).  
ISACO investment performance verified by Independent Executives Ltd.

 

**[ To download our free report 'A Golden Opportunity' >> ](https://www.isaco.co.uk/a-golden-opportunity/)**

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