'If only I had a second chance'

10 November 2017 | Investment principles


No matter our age, most of us would probably look back on some aspects of our lives and say to ourselves: "If only I could do that again; if only I had a second chance".

This, of course, tends to occur quite frequently in regards to our investing and saving.

Often, we regret not giving enough attention in the past to our personal financial planning, not beginning to invest regularly from early in our working lives and not adequately diversifying our portfolios.

And most of us probably have made investments that we wouldn't have touched in hindsight.

Just think about what you may have done differently with your investing and your financial planning if you had a second chance. This may help guide what you do in future.

A Vanguard study published earlier this year included a survey of more than 700 Australians aged 55-75 who had retired within the past 10 years, asking what they would have done differently with preparing for their retirement.

Perhaps unsurprisingly, many of these recent retirees strongly believe that they should have saved more (45 per cent of survey respondents), begun planning earlier for retirement (36 per cent) and spent more time on retirement planning (28 per cent).

In line with this what-would-I-do differently theme, online investment newsletter Cuffelinks published an excellent looking-back article a few months ago for its 200th issue.

Cuffelinks asked 37 well-known investment and economic specialists: "What investment insights would you give your 20-year-old self if you could go back in time?"

Their responses included: keep a budget, make the most of compounding returns, start saving and investing early, understand the relationship between risk and return (the higher the potential return, the higher the potential risk), hold a diversified portfolio, set an appropriate strategic asset allocation and understand that investment markets move in cycles.

And other responses included: avoid emotional-investment decisions, avoid chasing the investment herd, block out dist

racting market "noise" and don't pay excessive fund management fees. Another twist on looking back for investors comes from US personal finance author Paul Brown. It's been 30 years since Brown, who is over 60, wrote his first book on saving for retirement.

As he enters the popular age group for retirement, Brown asked himself in a New York Times article if his advice may have changed over the past three decades given his real-world experience.

"No, I wouldn't change any of the advice," Brown writes. "I told people to start saving aggressively while they're still young and to diversify their holdings. It was good counsel then and it is good counsel today.

"I also remain a steadfast believer in index funds and in keeping investment costs as low as possible," he adds. "That's how I have invested just about all of my retirement savings."

Yet based on his experiences, Brown says he would have added "not only more empathy but more real-world advice".

Two of his additional suggestions are to extend your working life, if possible, past conventional retirement ages and save more than you think you need because life doesn't always go according to plan.

It can be a valuable exercise to think about what we would have done differently as investors if given a second chance.

When looking back, however, watch out for the trap of becoming overly focussed on a past investment loss; it could impede your willingness to take appropriate risks in the future, as behavioural economists warn us.


Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.
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Robin Bowerman, Principal, Market Strategy & Communications at Vanguard Australia, shares investment and personal finance insights gained from over two decades in the finance industry as writer, commentator and editor.

Robin Bowerman