Safer pension fund advice

philwiththepill

I have been contributing to a legal and general stakeholder pension for the last 3 years.

The funds are currently invested in a UK equity fund and have done very well over the last 3 years.

I am worried I may lose these gains if there is a sudden or sustained fall in the FTSE. Just wondering is it worth bagging the profits by changing to a safer fund(s) and see how things go for the next 6-12 months?

What safer fund would people recommend, there are many to choose from, from cash to fixed interest, guilts to balanced funds?

I am 35 years old and dont expected to retire till 65 years old.

Many thanks

dunstonh

The funds are currently invested in a UK equity fund and have done very well over the last 3 years.

single fund investing is old fashioned and leads to lower returns over the long term. Especially if you pick a UK fund as the UK sector tends to be best performing sector once every 5 to 7 years historically (likely to be less frequent in future). So, in 20 years you may only be in the best place 3 years in 20.

What safer fund would people recommend, there are many to choose from, from cash to fixed interest, guilts to balanced funds?

That is regulated financial advice and its against board and FSA rules to give that in the way you want it here.

You certainly need to review your investment funds but not really in the way you are looking at.

philwiththepill

dunstonh wrote:

Especially if you pick a UK fund as the UK sector tends to be best performing sector once every 5 to 7 years historically (likely to be less frequent in future). So, in 20 years you may only be in the best place 3 years in 20.

Are you saying that since I have had a good run (+63% over 3 years), I should bail out for a while, wait for the L&G UK equity fund prices to fall and then by back in?

dunstonh

Are you saying that since I have had a good run, I should bail out for a while?

No, I am saying that you are currently investing in just one sector which is an old fashioned way of doing things and will result in lower returns over the long term compared to spreading your money over the various sectors.

i.e. where is your European, North America, Japan, Far East, Property, Fixed Interest etc segments?

You currently believe you have had a good run but when you realise that the UK is only likely to be the best place to be once every 5 to 7 years, your good run is only average compared to the alternatives.

ReportInvestor

Hi pwtp,

First of all, congratulations for addressing your pension issue in good time and for starting your stock market saving at such a good time .

You & dh are sort of talking at cross-purposes.

dh is suggesting that he could construct both a safer and a better performing pension portfolio for you. And he possibly could.

But I would question the logic of your initial question.

1) Why are you thinking of pulling out of the stock market after only three years of investing? Are you (or any professional fund manager for that matter) an expert at timing market falls? Of course not. That path leads to long term underperformance IMHO.

2)The fact that you are continuing to contribute to your stock market based fund , month by month, means that should there be falls (that are later recovered) you may even benefit from the falls in the long term. Reinvested dividends will also accomplish a similar effect - but not to quite the same extent. The catch phrase for this is "pound cost averaging".

3) If you don't think the stock market will perform over a 33 year period then you had better plan for a frugal retirement .

4) Why would you switch to fixed interest as interest rates start to rise? The gap between the stock market yield and fixed interest yields is quite narrow in historical terms at the moment.

In short the issue your question raises might be worth addressing when you are 55, but not 35 [and aren't stakeholder pensions designed to do that anyway by gradually moving you out of the stockmarket as you approach retirement?].

Have a quick look at this MSE thread

Is the FTSE ready to fall again?

EdInvestor

The OP could conveniently leave his old money where it is, and direct that his new money should be invested in something lower risk, like the property fund.

That would reduce risk by broadening his asset allocation rather than by "bagging his profits" - after all, how would he know what the market will do in the next year?

It's just as likely he would lose out by disinvesting.

dunstonh

You & dh are sort of talking at cross-purposes.

dh is suggesting that he could construct both a safer and a better performing pension portfolio for you. And he possibly could.

I am suggesting that investing in just one sector, and an underperforming sector at that, is not the best approach to take. Currently the eggs are all in one basket.

SL have a fairly decent stakeholder fund range and it isnt being utilised to best effect at present.

ReportInvestor

You mention

European, North America, Japan, Far East, Property, Fixed Interest

How do these variously compare on an IFA risk rating compared to UK equities?

Concern about risk was key to the OP's original query.

Paul_Herring

ReportInvestor wrote:

and aren't stakeholder pensions designed to do that anyway by gradually moving you out of the stockmarket as you approach retirement

No. That's "lifestyling". While some stakeholders provide it, it's not exclusive to them. There was an article on III that discussed the cons of lifestyling, but am unable to find it at the moment.

ReportInvestor

Thanks for that clarification, Paul. I think I may have been confusing my stakeholder pensions with my stakeholder CTFs.

In any case, It's not probably not something for the OP to worry too much about for the next two decades.

I also think that many investors are capable of their own lifestyling - which might cut costs, and might be time more appropriately to their needs and to the state of world stockmarkets at the time.

dunstonh

ReportInvestor wrote:

You mention


How do these variously compare on an IFA risk rating compared to UK equities?

Concern about risk was key to the OP's original query.

All can be utilised even in a cautious portfolio. Its the overall rating of the portfolio that matters. Not one particular fund.