As I’ve explained in previous articles, I’m an income-focused investor rather than someone who chases capital gains.

The decision to focus on income comes down to two factors – first, it’s not easy to find stocks which can guarantee you capital gains, whereas over the years I’ve bought several stocks which have done just the opposite and generated big losses very quickly; and second, the power of compounding never ceases to amaze me as without lifting a finger my interest earns interest.

You could put it down to age, although I decided to alter my approach some time ago, and while my pension may not have kept pace with the ‘Magnificent Seven’ or the Nasdaq – I don’t know many people whose pension has, in fairness – not only has it kept pace with inflation, it has held up well in times of market turmoil.

OBSERVING THE FIRST RULE OF MAKING MONEY

Given the first rule of making money is not to lose money, the fact my pension pot has not just held its own but has grown in value this year is a big comfort.

There’s no great secret to how I manage my investments – it’s a mixture of regular contributions into my SIPP, regularly reinvesting dividends and adding to a few ‘copper-bottomed’ growth stocks on pullbacks.

Contributing regularly to a pension is crucial, and the sooner you start the better as investing for retirement is a long process which can’t be rushed.

With this regular inflow of money, and with my cash ‘reserve’, I make fixed monthly investments in a couple of core holdings, a process known as ‘pound-cost averaging’.

If prices are up one month, I buy less shares, if they are down the next month I buy more shares, it’s that simple.

One of my core holdings is a global equity fund which has generated a higher rate of return each year than I could ever hope to achieve by myself, even if it hasn’t necessarily beaten the index.

Another is a fixed income fund which pays interest monthly, so by making a regular investment I’m turbo-charging the compounding process, buying more shares with capital and interest, while I have the opportunity.

Having said at the start I no longer chase capital gains, I do own a handful of stocks which I believe are attractive growth companies with huge addressable global markets, trading at a fraction of their intrinsic value, and which I expect to double or treble over the long term.

From time to time, when markets allow thanks to a sharp sell-off, I add to these stocks, but I don’t profess to be an expert in market timing and very rarely do I pick the low.

What I am doing, however, is backing my winners and increasing my bet when others may be giving in to doubt and selling – a long-term mindset is key, and as long as nothing has changed with your original investment case, all investors should have the courage to buy on a correction.

KEEPING SOMETHING IN RESERVE

I have a small cash ‘reserve’, which I referred to earlier and which allows me to add a stock or a fund to my pension if it looks really compelling, but the number of compelling ideas out there is very small and it’s rare that I add a new name.

The exception to this rule is when a company or fund I own is taken over and I have to redeploy the cash I receive.

Frankly, I would rather none of my holdings were taken over as more often than not bidders are opportunistic and the long-term returns I have factored into my thinking are thrown out the window or at the very least brought forward by several years.

Finally, the bulk of my pension looks after itself as it is invested in stocks and funds with instructions for the dividends to be automatically reinvested given I don’t need the income for several years.

What I will need to do going forward is to rebalance my investments so the monthly dividend stream is more evenly distributed and less ‘lumpy’ than it is at present.

That involves increasing some holdings and decreasing others depending on when dividends are paid, so when I do come to retire I have a steady monthly income which allows me to budget for my expenditure without having to dip into my capital at any point.

Naturally, this approach won’t work for everyone and most people will have their own ideas about managing money as well as their own skillset which they can bring to pension investing.

However, I’m mindful of past mistakes and am happy to let the ‘eighth wonder of the world’ do most of the heavy lifting for me – as Dirty Harry says in the classic 1973 film Magnum Force, a man’s got to know his limitations.

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