works pension, where to invest in the short-term

dunstonh

More important however is to watch charges, because the investment is so long-term.A 1.5% annual charge will wipe out 30% of the value of your fund over 25 years.

That argument is a bit mute though. I would save hundreds of thousands of pounds if I didn't buy my food from a supermarket but got it direct from source. However, its not practical to do that.

Whilst you could use shares in a SIPP to some degree it wouldn't give you enough diversification which is very important (and probably increasingly so as we see the western stockmarkets eclipsed by the emerging and Asian economies in a shift in world power over the next 20 years or so).

If you dont pay the 1.5% amc then you dont get access to that fund and you dont get the returns that go with it. Is it better to get 10% after 1.5% in charges or 5% with no explicit charges on cash (although there is an implicit charge you dont see which is typically around the 1% mark. This is known as the net interest charge and if effectively the profit margin for the banks).

EdInvestor

dunstonh wrote: »

Whilst you could use shares in a SIPP to some degree it wouldn't give you enough diversification which is very important (and probably increasingly so as we see the western stockmarkets eclipsed by the emerging and Asian economies in a shift in world power over the next 20 years or so).

A possible solution is to use a combination of a UK blue chip share portfolio (remember, the FTSE features a large number of big global companies with plenty of worldwide exposure to both developed and emerging markets), reinvesting dividends annually, alongside a selection of investment trusts and/or exchange traded funds covering other sectors including commercial property, commodities and foreign equities if wanted.

Both ITs and ETs will have much lower annual charges than ordinary pension funds and unit trusts. As long as you keep trading to a minimum so as not to incur unnecessary transaction costs, this would make a major difference over the lifetime of a typical pension.