Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

WE’RE quickly approaching the halfway point of the year and 2023 has brought investors challenge after challenge. From high inflation, rising interest rates to political turmoil here in the UK and an ongoing war in Europe, uncertainty is in the air.

Our latest ‘You and your money’ webinar answered your questions. Our panel of experts included Tom Stevenson, Ed Monk, and Emma-Lou Montgomery. You can watch the full webinar here.

Here are three customer questions our panel answered:

1. What purpose do bonds serve if I have a thirty-year time horizon?

Last year, bonds fell in sympathy with stock markets which meant that many investors really suffered said Ed.

So, what role can they play in the future?

“Well firstly, bonds can still be that diversifier. Their role as a diversifier didn’t end last year. Economic circumstances can change and there are reasons to think if we get to a peak in interest rates and they begin to come down, then bonds can recover a lot of that ground,” said Ed.

Of course, one of the results of such high interest rates right now is that bonds are paying a high yield at the moment.

But the thirty-year horizon may well affect their decisions. For example, if they’re saving into a pension, they may want to think whether they want to hold bonds at all.

“But bonds should have a diversifying effect. That’s certainly what they’ve done over the past twenty years. It’s just gone a bit wrong in the last year or so,” said Ed.

2. I have a diversified portfolio of funds in various regions of the world, in different sectors but during the recent Covid crash all the sectors seemed to suffer the same amount. Is diversification still worth it?

“Essentially the benefit of diversification is to answer the problem that we all face, we don’t have a crystal ball. We don’t know which assets, which geographical regions are going to do well at any time,” said Tom.

He emphasised that at the moment, it’s even more important to be well diversified because there’s a huge amount of uncertainty.

“But also, different geographical areas and different asset classes are behaving differently. For example, we’ve seen lots of strong growth in parts of the US market. But the Chinese and European stock markets are not doing so well at the moment. To cope with that issue, having a well-diversified portfolio always makes sense,” said Tom.

3. I’m 72 years old and already in retirement. Should I take financial advice?

At this age, Ed said that they may well have a settled financial plan but there are still ways financial advice can add value.

“This will all depend on the savings you have inside pensions and outside pensions. Inside tax-efficient wrappers like a Stocks and Shares ISA and outside of it. What financial advice can do is mix all those things together in a way that’s the most tax efficient it can be to give you an income that’s - if possible - free of tax but if that’s not possible, your tax bill to be as low as possible,” said Ed.

Tom said that at 72, there’s still many years of retirement ahead of them potentially and circumstances can change.

Emma-Lou said that the cost-of-living crisis has also changed things.

“It’s probably not an unusual scenario to be in retirement now and think, do I need advice? Because the cost-of-living crisis is a real curve ball”.

Fidelity’s retirement service can help to facilitate these conversations.

“Our advisers will tell you that things can change in terms of the rules governing your savings in retirement all the time. This ongoing advice keeps everything on track. For example, you can adjust your income levels, your withdrawal levels from pensions say, so that everything is sustainable in the long-term,” added Ed.

You can watch the full webinar here.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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