The key investing questions you’re asking us right now

Each quarter we publish our Investment Outlook, providing a snapshot of where markets are now.

As part of the activity surrounding the Outlook we invite Fidelity’s investors to submit their questions to us - and great numbers of them do just that. This time, more than a hundred responded in just a few days with questions on a whole range of investing topics. Taken together these questions provide a fascinating insight into what’s on the minds of our investors.

We endeavour to answer as many as we can across a range of formats. The Outlook’s author, Tom Stevenson, and I responded to a large batch of them in a special video, and then answered even more in an extended edition of our weekly podcast, the Personal Investor.

You can find those, as well as the Outlook itself, here.

In this article I’ve gathered together a further selection of questions which reflect the most popular of those we have received. One point to mention - the clear dominant theme this time round was the election victory for Labour and what the new government means for our finances. We’ve tackled that topic here in an article published shortly after the election result, and have also addressed the specific questions that exist over the government’s plans for pensions here.

Here's what else you’re asking us right now.

Can the tech boom continue - and where to turn if it doesn’t?

Several questions this time focused on the immediate future for tech companies - and there’s no shortage of reasons of why that might be on the mind of investors. Tech has driven returns for several years, but never more than this year when you would’ve struggled to make a gain without those giant tech names at the top of the US market.

Plenty see sense in dialling down exposure to tech as valuations rise ever higher, but doing that will have cost you money so far.

For the tech optimists, valuations have been supported by earnings but that will need to continue if a pullback is to be avoided. We’ve been here before and the tech giants have always managed to find a way to rise further, whatever the prevailing conditions. Expected reductions in interest rates will also help, particularly if cuts come through more quickly than currently expected.

If you’re looking for stock market options that don’t include tech, the best-of-the-rest recently have been defensive plays - consumer staples and utilities.

You can easily dial down your exposure to tech via pooled investments, including value focused funds, smaller companies funds or equal-weighted funds - all of which underweight tech.

What will Labour’s victory mean for markets?

In addition to lots of questions about Labour’s tax plans, there were also plenty on the potential market winners from their victory. Markets have responded positively in the days since the result suggesting investors are comfortable with the change in number 10.

Fidelity’s in-house UK investing teams have highlighted housebuilders and the construction materials sector as potential winners, with Labour due to reinstate housebuilding targets and perhaps also fund investment in local planning departments, which are under-resourced and can contribute to delays in the system.

They have also noted that Labour now also seems to be more supportive towards banks, viewing them more as a source of much needed investment and lending to the economy, rather than a pariah industry to be regulated and taxed.

Labour has committed to speeding up the UK’s transition to renewable energy and infrastructure will be an essential part of that. On the flip side, the party has repeated its commitment to remove the North Sea investment allowance, which will hurt that part of the oil and gas sector.

The new government could take a firmer line with water utilities given the well-publicised issues seen over recent years, putting pressure on regulators to move repeat offenders under special measures, which could include restrictions of dividend payments and executive remuneration.

• Read more - Labour goes for growth: what are the stock market opportunities?

How can I meet the retirement income challenge?

Away from the daily ups and downs of markets, several investors wanted help with meeting the challenge of generating an income in retirement, and in particular setting the correct mix of investments and withdrawals.

In one sense, the goal of investing in retirement is the same as it is at any other time - you want the best overall return you can get - but there are clearly other factors at play when you’re actively drawing down on your money. The right investment choice will come down to your wider financial circumstances and how comfortable you are taking risks with your money.

For example, if you’ve got sufficient other sources of guaranteed income you can perhaps take a bit more risk with your drawdown investments, where returns and income are not guaranteed. You can invest for growth with the aim of selling assets at regular intervals to provide the income you need. Growth funds with a focus on equities from around the world can work for this job. That could improve your potential returns in the long run but could also mean greater volatility along the way. If investments fall in value, your other income may need to tide you over so you won’t deplete your drawdown fund by selling assets after a loss.

If your income from other sources is more modest you may be less willing to risk sudden losses in your drawdown fund. Here, income funds which blend both dividend paying shares and bonds can play a role. They are set up to hold underlying assets which produce regular income payments. Ideally this income will meet your needs but if it doesn’t then assets can be sold to help provide the rest.

Whichever way you choose to invest and generate your income you need to set withdrawal rates which are sustainable. There’s a longstanding rule of thumb which suggest setting your income at 4% of your funds, then increasing payments in line with inflation, gives you a very high chance of your money lasting for 30 years. If you look further into those numbers you see that it may be possible to take more than that - 5% or even 6% - and still have a fairly good chance of sustaining your pot but only if investment returns work in your favour, particularly in the early years of withdrawals. You don’t need a spectacular return in those early years but rather to avoid big losses. Sadly, that’s not foreseeable but ongoing monitoring will mean you can adjust to market performance as you move through retirement.

Finally, having a cash pot on hand from which you can take income in the first instance will help make your income more predictable and should help you avoid having to sell assets after they fall in value.

The government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at www.moneyhelper.org.uk or over the telephone on 0800 138 3944.

Fidelity’s Retirement Service also has a team of specialists who can provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge.

Should I sell my losing bonds?

It’s been a miserable few years for bond investors and there are clearly a great many still sitting on losses. The sudden rise in interest rates and inflation since 2022 has badly hurt fixed-income assets and the growing expectation that we will not return to the rock-bottom rates of the past has prevented a full recovery so far.

Should investors now turn their back on bonds, even if it means locking in a loss? That may be a mistake. The attraction of fixed income remains its yield, together with the portfolio diversification it provides. The silver lining of a higher-for-longer interest rate environment is that investors are being paid to wait. Bonds, like cash, continue to be a good source of positive inflation-adjusted income.

Watch the Investment Outlook Q&A below

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Please be aware that past performance is not a reliable guide indicator of future returns. 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. Tax treatment depends on individual circumstances and all tax rules may change in the future. 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.