As with any investment, your capital is at risk and any income is not guaranteed.
After a long career, many people expect retirement to feel instantly liberating. In reality, it asks for a different kind of heroic endurance: making your savings last.
The ‘hero’s journey’ is the familiar arc: set out, face trials, hit a low and return stronger with the prize. In investing, it becomes “stay brave through the storm and you will be rewarded in the end”.
Sometimes that is true, but it assumes people can sit through large drawdowns (valuation declines) without changing course.
In retirement, those drawdowns can mean less income arriving in your bank account for reasons outside your control, which understandably prompts action. Most households are trying to fund a life, not win a medal for staying calm.
Even heroes struggle in a storm
Markets have always wobbled, but more of today’s wobble comes from the machinery rather than the market mood. A growing share of short-term trading is run by rules, risk limits and algorithms (computer programs that buy and sell based on preset instructions).
When conditions change, those shared rules and constraints can push many participants to act in the same direction at the same time: like dominoes, one slight push can trigger a chain reaction that travels much further than you’d expect.
Another reason the journey feels bumpier is that some of the tools designed to smooth risk can end up doing the opposite at the wrong time. Many funds and strategies aim to keep overall risk steady by automatically reducing exposure when markets become more turbulent, including:
- Risk parity – a strategy that spreads risk across asset classes, often using leverage (using debt or financial derivatives to increase the potential returns), to target a steadier overall risk profile.
- Volatility control – strategies that dial exposure up or down to hit a volatility target. When volatility rises, those rules can translate into selling, often into a falling market.
- Passive funds and exchange-traded funds (ETFs) - these have made investing cheaper and simpler by letting people buy a basket of shares as if they were a single stock. That is a genuine improvement for the end investor, but some of this trading can be less price sensitive at the margin, meaning that inflows into these funds can push prices up, and outflows can lead to prices falling.
If many investors are using similar approaches, the system can amplify itself. Selling increases volatility, which triggers more selling.
This is not about panic. It is about design. When lots of investors try to change direction together, the movement itself becomes the problem, a bit like a crowd funnelling through a narrow doorway.
Due to events in 2020 and 2022, investors have become far more sensitive to that sensation. It is not just that markets move a lot. It is that people now carry markets in their pockets.
With minute-by-minute portfolio updates, fewer investors are ‘investing it and then forgetting about it’ for the long stretches necessary to allow returns to accumulate, despite the advice received.
Instead, they pay attention to the journey as much as the destination, and most are not looking for a heroic roller coaster ride. They want steadier progress and some flexibility, without being forced into bad decisions at the worst moments.
Trading capes for a game plan
So, if volatility is likely to remain elevated, what is the practical response for real-life investors, especially those close to, or in retirement?
If we accept that higher volatility is here to stay, the question changes from “how do I avoid price swings?” to “how do I avoid being forced to act on them?”
Stop treating every bump as a problem to be eliminated and instead build a plan that can pay you through the bumps. Capital preservation still matters, but the bigger danger is being forced to sell assets at the wrong time because you need cash.
That is where sequencing risk (the risk of poor returns early in retirement) bites. If markets fall in the early years and you fund spending by selling investments, you lock in losses by selling more units at lower prices. That permanently shrinks the base that could recover later. A resilient, growing income stream (to mitigate inflation risk) can reduce that pressure by giving you spending power without constantly dipping into capital.
A portfolio that prioritises income that can grow, ideally faster than inflation over long periods, gives you a rising pay packet and reduces reliance on selling assets to meet everyday costs (over time, the same approach also helps with longevity risk - the risk of outliving your money).
The key is to avoid selling the cow to buy milk. If you can generate a dependable and growing stream of income, you do not need to liquidate assets simply because markets are having a tantrum.
You still protect the herd, as you still want long-term capital growth, but the income does the heavy lifting from year to year. That is how you blunt sequencing risk early on and lower the probability of running out of money later (longevity risk).
The right support, no heroics required
The Baillie Gifford Monthly Income Fund is designed to deliver the highest level of income that is resilient and sustainable over the long term, focusing on the actual income amount and protecting spending power against inflation.
Over shorter periods, it prioritises reducing income volatility so that the monthly distribution can be reliably incorporated into real-world spending plans.
What that means is that over the past five years, the Fund has paid a consistent monthly income and the annual income level has increased each year. That same period included several bouts of market volatility and double-digit drawdowns.
Simply looking at short-term yield can be misleading. In pounds and pence, if a fund holder received circa £10,000 in income payments in 2020, they would have received circa £12,368 in 2025.
This also embeds a practical discipline around income drawdowns – our risk guideline states that the fund’s income production should not decline by more than 10 per cent in any given year.
We also recognise that preserving the long-term capital base matters because tomorrow’s capital is the engine of tomorrow’s income. It draws on a broad opportunity set, backed by risk management that prioritises income resilience over short-term capital smoothness.
That matters because the problem is not that the ‘hero’s journey’ is wrong, but that it no longer fits (those close to or in) retirement investing.
Stories reward endurance because the ending is written in advance; real investors do not have that certainty. What matters is not surviving the storm but avoiding being forced into making hard decisions at the worst moments.
That is why smoothing the journey (using a reliable income component), rather than the market, has become essential. A dependable, flexible income can reduce behavioural risk and help investors stay invested without relying on heroic resolve.
The modern structure of markets means heightened capital volatility will likely remain a feature, not a bug. That means prices can lurch around for reasons that have little to do with long-term fundamentals. We believe a strategy engineered to keep the income delivered more stable can be the difference between riding out volatility and being forced to crystallise it.
That is why we believe the Baillie Gifford Monthly Income Fund has a meaningful role to play in a client solution.
Baillie Gifford Monthly Income Fund
Distribution per unit (pence)
Rolling 12-month periods to 31 December each year
| 2021 | 2022 | 2023 | 2024 | 2025 | |
| Baillie Gifford Monthly Income Fund B Inc | 3.9 | 4.1 | 4.2 | 4.4 | 4.7 |
Annual past performance to 31 December each year (%)
| 2021 | 2022 | 2023 | 2024 | 2025 | |
| Baillie Gifford Monthly Income Fund B Inc | 9.7 | -9.6 | 8.9 | 2.5 | 7.5 |
| Sector Average* | 10.9 | -10.0 | 8.1 | 9.0 | 11.6 |
Source: FE, Revolution. Net of fees, total return in sterling. *Investment Association Mixed Investment 40-85% Shares Sector
Past performance is not a guide to future returns.
The Fund has no target. However you may wish to assess the performance of both income and capital against inflation (UK CPI) over a five-year period. In addition, the manager believes an appropriate performance comparison for this Fund is the Investment Association Mixed Investment 40-85% Shares Sector.
Important information and risk factors
This article was produced and approved in February 2026 and has not been updated subsequently. It represents views held at the time and may not reflect current thinking.
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, and Baillie Gifford and its staff may have dealt in the investments concerned.
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.
Investment markets can go down as well as up and market conditions can change rapidly. The value of an investment in the Fund, and any income from it, can fall as well as rise and investors may not get back the amount invested.
The Fund’s share price can be volatile due to movements in the prices of the underlying holdings and the basis on which the Fund is priced.
Further details of the risks associated with investing in the Fund can be found in the Key Investor Information Document or the Prospectus, copies of which are available at bailliegifford.com.
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