Many retired people and other investors who enjoyed a good standard of living when interest rates were high are worried about their current income and are considering switching to alternative investment vehicles.

Before switching, varying or replacing your investments it is important to take a long-term, holistic view, preferably with the help of a licensed financial adviser, says Lizwe Nkala of Old Mutual Personal Finance.

Assess how much of your money is allocated to interest-bearing products. Are you experiencing real financial pressure, or is your portfolio performing satisfactorily overall despite a drop in the section allocated to interest income?

Long term returns really count
"In any portfolio there will be better performing and worse performing assets," says Nkala. "Property may go up as shares come down. International assets may fall while local markets prosper. It’s the total real return, over the long term, which matters. This is a return, over the long-term, after taking inflation and tax into account. Focusing on any one portion of your investment in isolation, or in the short term, may lead to wrong conclusions and unwise decisions.

If you are jittery and considering a change to your investment portfolio, you should ask the following questions:

  • Has my time horizon changed?
  • Has my risk profile changed?
  • Have my needs/reasons for buying the investment changed?

    If you answer "no" to the above questions, it’s generally recommended that you shouldn’t get out of your investment. Should you answer "yes" to any of the above questions, contact your financial adviser and discuss the performance of your investments.

    If you and your financial adviser agree that a change is appropriate, don’t fool yourself into thinking that you can outperform the market by picking the one winning sector. Diversify into local equities as well as some bonds, cash, property, international assets and possibly alternative assets. Selecting broad-based balanced portfolios that already embody diversification can do this.

    Resist two very different temptations when re-evaluating your strategy, advises Nkala:

  • Avoid the urge to recoup losses by putting money into high-risk, 'get-rich-quick' investments. Like the gambler who doubles down to get even in a single hand, you could lose the lot.
  • Avoid a 'once-burnt, twice-shy' approach to the equities market. Several years ago share prices plunged and many investors switched to high interest-bearing money market investments. As a general rule, it’s not advisable to abandon equities when shares prices are low. History shows that shares outperform many other asset classes over time. Cash is an important part of your portfolio, but it’s only one element.

    Start saving early
    "Many people believe that knowing when to buy and when to sell is the secret of successful investing. The truth is that no one knows exactly when markets will rise and when they will fall. Generally, the sooner you can start saving, and the longer you save, the more likely you are to weather the storms.

    "Be very clear about your investment goals. What is it you need to achieve, and by when? Take into account key issues such as your tax position and risk appetite. Develop a personal financial plan that suits your individual needs and you will be better placed to survive the ups and downs of markets. Do this with a professional financial adviser or broker.

    "If you do buy a new product, invest with a reputable institution that is experienced in managing different market conditions and investigate all costs and commissions involved."

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