Reviewing my DC Pension Investment

lisboa84

Hi folks.

My work DC pension has been in a default fund, but as I'm mid 30's, the general consensus seems to be that I should be investing higher risk.

So I was wondering if these selections are a wise choice for the next 20 years at least -

Investing 50% in a High Growth Portfolio, and 50% in a Passive Global Equity Partial Hedge.

The High Growth Portfolio is currently invested -

Absolute Return Fixed Income 3.2%
Cash 0.6%
Commodities 0.7%
Developed Markets Equity 56.6%
Emerging Markets Bonds 5.1%
Emerging Markets Equity 19.2%
Eurozone Equities 0.3%
Global Corporate Bonds 0.3%
Global High Yield Bonds 3.8%
Global Property 3.5%
Global Small Cap Equity 3.1%
Low Volatility Equity 3.3%

Asia-Pacific (ex-Japan) 19.9%
Europe (ex-UK) 14.1%
Japan 6.1%
North America 49.1%
Other 6.7%
UK 4.1%

Total expense ratio (does that mean fund cost?) is 0.41% - but I'm not sure if it's me or my employer paying that.

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The Passive Global Equity Partial Hedge is currently invested -

Communication Services 8.6%
Consumer Discretionary 10.6%
Consumer Staples 8.2%
Energy 6.1%
Financials 16.1%
Health Care 11.8%
Industrials 10.4%
Information Technology 15.6%
Materials 4.7%
Other 1.5%
Real Estate 3.3%
Utilities 3.2%

Asia-Pacific (ex-Japan) 11.3%
Europe (ex-UK) 14.4%
Japan 7.4%
North America 59.1%
Other 2.4%
UK 5.3%

Total expense ratio 0.24%.

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Both the options have a risk reward of 6 out of 7.

Both the options have posted relatively similar returns in the last 5 years - 9.6% and 8.9%.

I've read in a few places that global equities are the way to go for longer term investing.

So is splitting my funds 50/50 between these two 'equity heavy' portfolios a decent choice in you guy's opinion?
Or should I review other portfolio options with lower equities?

Thank you for taking a few minutes out of your day to read.

Linton

As you are investing for perhaps 30 years time either portfolio looks fine. I dont see any need for both and if I had to get rid of one it would be the passive partial hedged one - why do you need to hedge, unless perhaps you believe that the £ is going to outperform the rest of the world's currencies over the next 30 years.


The main reason not to go for high equity in your situation would be if you would be so seriously upset with say a 40% fall that you would panic and convert your depleted funds onto cash. The High Growth Portfolio is less than 90% whereas the passive is about 100%. Having some non equity investments does seem to help a bit with rebalancing. So again the High Growth portfolio looks better.


Finally costs - yes the passive fund is 0.17% cheaper but its performance (which includes costs) is lower over the past 5 years, so I dont see the cost difference as a significant factor, it is very small anyway.