Being Cautious 31 July 2018 at 1:28PM edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning 5 replies 664 views

DaveGa

I had to retire early due to ill health but I can still work from home. I am taking income from a final salary pension and also earning from self employment. I am paying as much as I can into a personal pension plan while I still have a decent income to do it. I am 55 and my personal pension fund is my safety net to keep my going until state retirement age.

I am increasingly worried about the impact of Brexit and Trumps attitude to the rest of the world and the effect it will have on the stock market and hence my pension fund valuation. When I chose the personal pension fund my financial adviser determined that my attitude to risk was cautious/low and the fund that I'm in reflects that.

So - the question is - should I be considering other options or even switching to a cash fund if I'm worried or am I being too cautious ?

dunstonh

I am increasingly worried about the impact of Brexit and Trumps attitude to the rest of the world and the effect it will have on the stock market and hence my pension fund valuation.

There are always events going on that are negatives. Many of the events are or have been far worse than the two you mention. So, what has changed from your point of view that makes you think that these are suddenly riskier than other events?

Why do you think Brexit will have a negative effect on your investments?

So - the question is - should I be considering other options or even switching to a cash fund if I'm worried or am I being too cautious ?

A cash fund would be replacing investment risk with inflation risk and shortfall risk. Over the next 12 years, you would be guaranteeing a loss in real terms if you did that. Whereas with investment risk, that is unlikely. Investments will zig zag in value but that is a good thing when you are paying into them. Not a bad thing.

You have 12 years. Recovery periods tend to be 3 months to 2 years.

If you are going into drawdown when you get to 67, you could be invested for over 30 years. You could see a dozen crashes over that period.

atush

Trump is pretty much priced in, unless he declares war on somebody. For my part, am flying home in Nov to vote against his party.

Second, brexit is pretty much priced in, though a hard brexit might pack a bit of a punch. But remember, the market hasnt done too badly since the vote.

dunstonh

Second, brexit is pretty much priced in, though a hard brexit might pack a bit of a punch. But remember, the market hasnt done too badly since the vote.

And it wasnt really the markets that suffered but Sterling. That in turn actually saw the value of most peoples investments rise (as any decent portfolios have a global spread).

DairyQueen

DaveGa wrote: »

When I chose the personal pension fund my financial adviser determined that my attitude to risk was cautious/low and the fund that I'm in reflects that.

So - the question is - should I be considering other options or even switching to a cash fund if I'm worried or am I being too cautious ?

The issues scaring you are, on a range of 1 thru 10 of global events, around 3 (i.e. 'what issue?'). If these events scare you then perhaps you should not be invested in the markets at all.

Consider...
The risk of holding too much cash can be quantified as a definite loss (courtesy of inflation) versus a 'business as usual' possibility of a short/medium-term loss, and the probability of a longer-term gain, if invested in the markets at a reasonable equity/bond ration, and within a properly diversified portfolio.

If selling and holding cash helps you sleep better than that is the correct decision for you, Caveat: providing that you realise that no risk = definite loss.

Your choice.

[Deleted User]

The American economy is none the worse for President Donald Trump and his government policies, indeed it is doing well!
The economy of The United Kingdom of Great Britain and Northern Ireland is also robust despite Brexit uncertainty.
I wouldn't make rash decisions based on general scaremongering and prejudice.
Regards

mrwmartin