Drawdown investors remain resilient despite market volatility


  • A third (33%) of drawdown investors would remain steadfast and never make changes to their investments no matter how much stock markets fell
  • Of the just over two thirds (67%) who said they would be worried about stock market moves, markets would need to fall by 7.5% on average in a single day to spook investors enough to review and move their money
  • In the event of major stock market moves, 59% of investors would move their money around a mix of asset classes, while 21% would move their money into cash

Stock markets would need to shift significantly in one day before drawdown investors would be worried enough to consider moving their money, according to a new study from Canada Life. In fact, the research1 suggests most drawdown investors are a risk tolerant bunch with a third (33%) prepared to weather the storm and make no changes to their portfolio no matter how much the stock market fell in one day.

Effectively it would take a mini-market crash of 7.5% to make people worried enough to review investment strategies and change their asset allocations. In the event of a significant market fall, 59% of investors would shift their money around a mix of asset classes, while just over one in five (21%) would transfer their entire savings into cash in the event that the stock market fell significantly.

In the event of market falls, DIY investors are more likely to see cash as a safe haven (25%) and less likely to move to a mix of asset classes (50%) compared to people who have an adviser relationship – of whom 18% said they would move to cash with a further 66% switching asset classes.

Andrew Tully, Canada Life technical director, said:

“The majority of drawdown investors show they will remain remarkably resilient in times of stock market volatility and global economic uncertainty. Far from knee-jerk reactions to the latest breaking macroeconomic news, our research suggests most people using drawdown to fund their retirements are sensibly taking a longer term view."

“Dealing with the prevailing headwinds is all part of the game when you continue to invest into retirement. It is key though to have the right diversified investment strategy and ensure your essential expenditure is covered through a regular income. Only then will you will able to flex and change your investment approach as the economic environment dictates."

“As people move into retirement, it can become increasingly tempting to adopt a risk-averse stance and reduce exposure to stock markets. With global markets fairly volatile and continuing Brexit uncertainty, consumers will likely see cash as the safe haven in an increasingly blustery storm. But cash also carries its own risks, that being inflation and historical low interest rates, so settling for such poor yields exposes a pension pot in real terms."

“Making rash investment decisions without a plan can be wrought with danger. Seeking the help of a professional financial adviser can not only help consumers make proper informed decisions around retirement but can also ease the worry in turbulent times.”

1. Source: The research was conducted online by Censuswide between 5.11.2018 and 9.11.2018 among 500 respondents aged 55+ who have income drawdown investments.