Couple of quick questions...

Jaguar_Skills

I am planning on investing £600 pcm into my Cavendish pension. This will be split 50:50 between two funds resulting in 90% equities.

I have heard people say that you need to rebalance to keep 90% equities. Do I only need to do this if I change the amount paying into one fund? Or do I need to look at whether after say 1 year the 1st fund is worth much more than the 2nd?

The second question is regarding Acc or Inc units. Is one more beneficial over the other for a pension? If it makes any difference I am a HRTpayer.

Thanks in advance guys.

redbuzzard

Adjust the amount in the funds to the intended weightings now and then.

What this does is to "bank" the equity profits if the higher equity fund runs ahead, conversely to put more weight back into higher growth assets if they have underperformed. By rebalancing you are always selling (relatively) dearer and buying cheaper - not the other way round, which is why you do NOT just do what some people instinctively do and buy more of the fund that has done better.

Accumulation units avoid the need to buy more units with income, which could incur trading charges.

Jaguar_Skills

redbuzzard wrote: »

Adjust the amount in the funds to the intended weightings now and then.

What this does is to "bank" the equity profits if the higher equity fund runs ahead, conversely to put more weight back into higher growth assets if they have underperformed. By rebalancing you are always selling (relatively) dearer and buying cheaper - not the other way round, which is why you do NOT just do what some people instinctively do and buy more of the fund that has done better.

Accumulation units avoid the need to buy more units with income, which could incur trading charges.

Thanks Redbuzzard.

So just as a quick example then. Say I put in £600 per month. £300 into Vanguard and £300 into Blackrock. At the end of the year each should (based on 5% growth) be worth £3780.

If Vanguard was at £3500 and Blackrock at £4000 should I move £250 from Blackrock to Vanguard or just adjust the monthly contribution for a month or so?

Are you saying that Acc are the best option. As that is how I understand it. Just be good for clarity.

xylophone

If you don't want income choose Acc units.

Jaguar_Skills

xylophone wrote: »

If you don't want income choose Acc units.

Well I am using it for my pension? I won't be accessing it for 30 years +?

redbuzzard

You could just move £250 as you say; easier. Or do which ever incurs least cost if the amount is material enough to bother you.

Yes, use accumulation units if available for the funds you want.

Jaguar_Skills

But the basic premise of re balancing is right that if one goes up by more than the other you even out the amount of £££'s in each to set yourself to the equity level you want?

redbuzzard

Jaguar_Skills wrote: »

But the basic premise of re balancing is right that if one goes up by more than the other you even out the amount of £££'s in each to set yourself to the equity level you want?

Yes, that's right.

atush

Jaguar_Skills wrote: »

Well I am using it for my pension? I won't be accessing it for 30 years +?

Which means you are in the accumulation stage so want Acc units. Ie you aren't drawing an income so want the dividends to not be paid as income, but to be reinvested.

xylophone

Well I am using it for my pension? I won't be accessing it for 30 years +?

Some people might want to draw income from their funds in order to invest in other funds?

Jaguar_Skills

Thanks again all. I am nearly there!

Cannot believe however that the Cavendish pension you have to fill in a form and post it! Where is the online form!