Company pension with CIS - Which fund(s)?

smi85

I'm 26 years old and I am about to start my first pension through a company I start working for on Wednesday. The pension in question is a CIS Stakeholder, after my 6 month probation period my employer will contribute 4%. Initially I'm planning to pay the minimum (2.5%) until I've used my cash ISA allowance and cleared a few small debts. After which I'm looking to increase to ~10%. I'm on £23350 basic salary, plus overtime and bonus. Looking to spend the rest of my career at this firm.

My CIS fund options are:
- With-profits Stakeholder Fund
- FTSE All-Share Tracker Pension Fund
- UK Growth Fund
- European Growth Fund
- US Growth Fund
- Sustainable Leaders Fund

I'm totally new to investments so after a bit of searching I'm still none the wiser to which I should be investing my pension in? I have read favourable things about the Sustainable Leaders Fund and their UK Growth Fund also looks to be doing well? But on the flip side I have read topics saying to avoid growth funds. I have had a brief look at some of the charts etc on HL.co.uk but to be honest it doesn't mean a lot to me!

Thanks a lot for any help, appreciated!!

smi85

anyone?! please

srcandas

smi85 wrote: »

anyone?! please

Can you not do more than one?

The problem is that there is a lot of guess work in this sort of thing. You can't say for sure which is best.

At this stage if I were you I would go with gut feel. Then move new deposits in 6 months or a year to the next fund. Get a spread. Over the time spread you have I'm sure they'll all have good periods.

I'd ignore with profits if that is fairly conservative.

smi85

Hi thanks

Yeah I can spread my contributions over more than one fund, my gut feeling is to go with the uk growth fund and/or sustainable leaders fund. I think the latest budget and future budgets are going to be geared towards boosting uk businesses, i don't think it's going to get any worse than current only better. Sustainable leaders fund appeals to me as well because there are obvious benefits for businesses to become more "green" and obviously the government are going to be investing a lot in such "green" areas in coming years/decades, renewables etc is definitely becoming more relevant to everyday life than in previous years.

Maybe i'm barking up the wrong tree here!

srcandas

smi85 wrote: »

Maybe i'm barking up the wrong tree here!

Don't worry too much about getting it wrong. Over the next 40 years of fund selection you will choose some great funds for certain periods of time that will do well; equally you will choose some dogs. Some years you may make a loss, some years you will do better than average, possibly a lot better

Have a look at performance graphs over many years and note that despite falling prices for even periods of two or three years the overall trend over say 10 years will be invariably positive.

Looking at Sustainable Leaders Fund you can see that it is invested geographically roughly 85% UK - 15% USA.

Both UK growth and Sustainable are invested in big spreads of large stable corporates. Even if one or two of these giants did badly the funds would I believe prove resilient.

Later on, in say a year or two you may wish to add either Europe or the USA to give yourself a more geographical spread.

The thing to remember is the bigger the spread, be that geographical, type of investments (e.g. growth equities, income equities, bonds, property, etc.), industry sectors - the more likely you are to be close to average results. The more specific you are the more likely you are to well under perform or well over perform the average. But having said that investing in a number of funds over many years is much less of a roller coaster ride than say picking two or three shares.

The only thing I'd be wary about is watching the prices too often and being tempted to switch funds the moment there is a price fall. Normally changes cost in terms of fees. Choose your strategy (and the one you have chosen I would not be unhappy with personally) and give it a chance.

And of course as you are buying into the fund each month a drop in price means you buy more shares in the fund that month as they are cheaper.

Remember also that a falling value is not always a sign of a bad fund. If for example the FTSE falls 20% in a year and a FTSE based fund falls 10% then the fund manager has earned his pay.

Well not sure how helpful this is but for sure you are in a good place getting your pension funds underway at a young age :beer:

smi85

Srcandas thanks very much, that's actually extremely helpful. I'm going to stick with my current choices and see how that pans out over the next few years, I'm looking to balance meaningful pension contributions with saving for a deposit!