Is starting a pension like taking a gamble on the future?

seacaitch

Johnny_Doe wrote: »

I am nervous because I invested (IFA advice) £3k at the top of the dot com bubble and it's currently at £2.5k 17 yrs later!! Not a great return I'm sure you'd agree? Although it's still only on paper.. I'd rather catch the market when it dips and hope for a better return over the next 17 years. I'm also investing regularly monthly into the market but currently in defensive funds..

Look at the FTSE 100 since the peak in 1999, 6930 (dec 31st 1999), not much more than that now 17 years later!

So yes I think timing the market is very important..

Investing is a discipline that can easily trip people up, particularly those starting out, leading to negative formative experiences that can put people off investing for life. This can prove disastrous - seriously life changing for the worse - because for many people investing is essential to ensure they have a decent standard of living later in life. What's worse is that the exciting news stories that bubbles generate means that these are precisely the times when many novices choose to invest for the first time with predictably dire consequences.

One reason I think investing is challenging is that it can require a degree of self-analysis (self-honesty) that few other disciplines need to the same extent.

My tough love suggestions for you are:
1. Take responsibility for the error you made back in '99/00 when buying into tech stocks at what was to prove the peak of the largest stockmarket bubble in history. You were not alone: millions of others did likewise and also made very poor and expensive decisions.
2. Recognise the psychological impact this experience has had on you: still highly wary of stocks 17 years later.
3. Pledge to learn the learn the right lessons from this experience, not the wrong lessons.

Perhaps the key lesson is, certainly when investing for pension provision, to treat it as a routine, fairly boring (albeit satisfying), get-wealthy-slowly long term plan, such as you might approach planting a woodland, not as an exciting get-rich-quick scheme.

Following on from that, you're not seeking the perfect plan: good enough is better than perfect. Those seeking perfection when investing will often achieve poor results: churning portfolios, chopping and changing from one strategy to another, chasing performance; wasting time, energy and money, and often ending up even further from their goals.

Crucially: form a plan that can deliver your long term goals, is matched to your risk tolerance and ability to handle volatility in your portfolio as a whole, and that you can stick to through thick and thin.

Then just stick to it through thick and thin, with only very slight modifications over time as you learn about yourself and/or your goals evolve.

seacaitch

lonewolf123 wrote: »

My employer does offer contributions to my pension (only up to 2% of pay) but the pension options are quite limited with average returns (pretty much tracks inflation) and I feel I can do better investing into a SIPP which I can tailor my investment to my risk levels. Therefore I will NOT be eligible for employer contributions due to opting out.

You mention a SIPP but you should also consider a 'traditional' Personal Pension (opened via Cavendish, for example to maximise cost savings), which depending on what exactly you're planning to invest in, might prove a lower cost route and simpler to operate.

The term 'SIPP' seems to be used now in a way that suggests to me a few people may be unaware of these other options.