Risk averse but ....

waveydavey48

Hi all - apologies in advance for my financial ignorance. As I am very averse to risk and am never sure when I will need to call on my savings I've always kept my money in cash ISA's. I did think about index trackers after reading "Motley Fool" but chickened out!


After the recent rate cut I checked on my frozen pension pot which Fidelity are investing until I retire in 5 years time and the rate of return for the past year is shown as over 17%.


I know there's no decent return without an element of risk but there's a big difference between 0.25% or whatever and 17%+.


Is there an easy way to put some cash into whatever fund the fidelity boys are using and effectively take a punt?


I repeat my apology for my lack of financial knowledge... be gentle folks.

ARandomMiser

At the minute there seems to be good returns on pensions and investments - probably due toa mixture of low interest rates, speculative investing due to the brexit referendum and the calming/easing measures made by the government and Bank of England. However it is probable that there will be a significant fall again (so don't count those chickens just yet).

There are still some good saving rates for smaller amounts of money in the likes of TSB, Nationwide and even Santander.

You can also invest in a low risk fund within an ISA (look at the Fidelity ISA page).

Pincher

A repeat performance?

You are more likely to get a reverse performance, and get a -17%, buying the same things.

redmalc

No one can give you any assurances as to which way the markets will go,myself I have sold a large proportion of my funds and currently holding in cash banking some good profit because I think we are due a correction

masonic

The investments haven't really gone up in value by 17%, the pound has gone down in value, causing much of the apparent gain.

When the pound devalues, then things become more expensive in pounds, including your pension portfolio, which probably invests internationally.

The other way you can look at the situation is that when the pound devalues, your cash savings are able to buy less of those investments. Buying now means that you get a worse deal than you would have if you bought them earlier this year because those pounds you've saved up are not worth as much to those who would be selling you the investments.

So you could look at it as a jump in the value of most investments, or a drop in the value of your savings. However you look at it, past performance is no guide to the future.

quotememiserable

If you're keeping money long term, and go with 'low risk' then you'll get very poor returns. It's a very high risk strategy in terms of your likely outturn. Pensions schemes know this so they'd never stay in cash, or they couldn't meet their liabilities. Taking more risk will normally mean higher return - much much higher over the long term, but you'll see fluctuation, so the value will go down sometimes as well as up. For instance, take a look at fidelity special situations. Over the last five years it's averaged 17% per annum, but it isn't a smooth ride.
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atush

What you need to think about is, that investment risk isnt the only risk. There is also Inflation risk, and Shortfall risk. so understand these next.

Then, your cash. it is good to have an emergency pot (even if rates are c*ap) but you could always invest some of your ongoing savings into a S&S isa. In the same funds as your pension, a Global tracker, a general investment trust, or the Vanguard series (different levels of risk).

Monthly investing helps you relax about the ups and downs as when it is down, you get more for your monthly stake.

tacpot12

Investing for the long term is a sensible thing to do, once you have sufficient savings in cash to cover the reasonably foreseeable emergencies that life might throw up.

If you want to emulate the Fidelity boys, you need a way to buy a similar range of asset classes, that is managed for you, as cheaply as possible. I've been looking for my partner who is similarly cautious, and the best I've found so far is the Vanguard LifeStyle Strategy 20% Equity Fund, but I'm still looking.

atush

To me, 20% equity is VERY cautious lol

waveydavey48

Thanks for those helpful replies .... food for thought.

dunstonh

After the recent rate cut I checked on my frozen pension pot which Fidelity are investing until I retire in 5 years time and the rate of return for the past year is shown as over 17%.

That means it cannot be frozen. Frozen has a specific meaning.

I did think about index trackers after reading "Motley Fool" but chickened out!

Probably a good job. Going into investments that Motley Fool got paid to promote when your knowledge isnt good and you say you are low risk is not normally a good idea.

Is there an easy way to put some cash into whatever fund the fidelity boys are using and effectively take a punt?

Taking a punt is not a statement that goes well with someone who says they are risk averse.