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Asset allocation is key to efficient drawdown, Lymburn tells investors

Income drawdown inv-estors should not cash in their investments simply because they do not know what else they can do to safeguard their portfolios, says The Drawdown Bureau.

The Drawdown Bureau says asset allocation is the key to utilising the efficiencies of income drawdown, even when equity markets are producing losses.

Clients invested in drawdown through a Sipp should remember they can change their investment portfolio but should be wary of cashing investments that have lost money as they run the risk of losing out on any recovery, says bureau director Ronnie Lymburn.

Lymburn argues that drawdown needs not be risky as cautious investors can always invest in asset classes that are far safer than equities, with fixed-interest funds and corporate bonds giving positive returns.

Lymburn says: “Sterling corporate bonds proved the best-performing asset class in 2001, beating the returns on cash, gilts and equities. Bonds also outperformed equities in 2000 and there is every chance they will outperform equities for the third year running.

“Remaining in cash gives maximum security but returns will be lower, given that inflation is eating into headline interest rates.

“Those in drawdown can still achieve very good returns from their portfolios, providing they speak to specialists who are able to provide the correct asset allocation to ensure their returns are achieved – even if the equity markets are producing losses.”

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