coronavirus and personal pensions

dunstonh

The US spent most of the 20th Century as an emerging market.  So, looking at historic 20th Century returns is not a good idea.

Has anyone considered temporarily reallocating their pension to 100% cash until things improve?
Goodness no.   Markets are down 15% already.   Going to cash will crystallise that loss and you wont know when to go back in again.  So, you will miss any bounce as well.

 I'm near retirement and this is bothering me just a bit!
How near?   Most crashes (and this is not a crash yet) recover within 6-12 months. Even the extreme ones tend to be only a handful of years.   If you were very close and buying an annuity, then you should be phasing your risk down anyway. If you are going into drawdown then you are likely to see another dozen or so crashes or large falls before you die.  So, no point reducing risk to much.

Username999

vulcanrtb said:

Has anyone considered temporarily reallocating their pension to 100% cash until things improve? I'm near retirement and this is bothering me just a bit!
Obviously there's a risk that I'll save on some losses but will in all likelihood mistime the reinvestment into equities.
Thoughts?

Depends how much cash you have already.
I've recently retired and liquidated some of my holdings to cash.
Not 100% though.

Username999

dunstonh said:

Most crashes (and this is not a crash yet) recover within 6-12 months. Even the extreme ones tend to be only a handful of years. 

The FTSE100 (I know not the best index) is currently below the high of the Dot.Com bubble. 
Yes ignoring dividends.
So yes it recovered 15 years later, but not "within 6-12 months"!!
And yes I was invested though the 90's (since 1984).
And back then the famous Vanguard Funds didn't exist.
All though 2000 to 2003 the "experts" were saying the same, "time in the market" because they were/are paid to say that.
IMHO. 

Albermarle

The FTSE100 (I know not the best index) is currently below the high of the Dot.Com bubble.

Another good reason to be invested globally and not with overconcentration in one index .

To be fair to the FTSE 100 , the dividend payouts are high by global standards.

Thrugelmir

Deleted_User said:

Thrugelmir said:

Deleted_User said:

Thrugelmir said:

Albermarle said:

Japan

OK fair enough , but I think in general markets do eventually shrug off most crisis long term , otherwise why all the advice given about investing long term ?

Bulk of return comes from dividend and income reinvestment not capital growth. 

Average annual return for SP500 since 1920s is circa 11%. Corrected for inflation real return gives you 7%.

S&P 500 didn't exist in the 1920's. Only consisted of 90 companies until 1957. 

Founded as Composite Index in 1926. Starting with 90 companies.  Expanded and renamed in 1957. The point isn’t the name or number of companies, but the claim that returns equal dividends does not hold water, unless you look at very specific time spans.  In fact, Graham gives you a formula for estimating returns which directly contradicts this claim

The S&P isn't the only index available. There's some 3,500 available globally. All at some point of time were the place to invest. 

Username999

Albermarle said:

The FTSE100 (I know not the best index) is currently below the high of the Dot.Com bubble.

Another good reason to be invested globally and not with overconcentration in one index .

To be fair to the FTSE 100 , the dividend payouts are high by global standards.

Come back in 30 years time and we'll see.
And how does one invest "globally", buying into 4000 stocks you know nothing about, with weightings you don't understand?
That prop up undeserving stocks.
Oh yes I know, if the charges are 0.22% per year, it's a good fund (for the financial industry). 
The FTSE100 is very 'global'.
 
IMHO

Prism

Username999 said:

Albermarle said:

The FTSE100 (I know not the best index) is currently below the high of the Dot.Com bubble.

Another good reason to be invested globally and not with overconcentration in one index .

To be fair to the FTSE 100 , the dividend payouts are high by global standards.

Come back in 30 years time and we'll see.
And how does one invest "globally", buying into 4000 stocks you know nothing about, with weightings you don't understand?
That prop up undeserving stocks.
Oh yes I know, if the charges are 0.22% per year, it's a good fund (for the financial industry). 
The FTSE100 is very 'global'.
 
IMHO

Most people don't understand any of the companies in the FTSE 100 either to be fair. They know the names and roughly what they sell but that is it. The FTSE 100 is reasonably global but lacking in a couple of sectors. I have no idea if the UK economy will roar back into action over the next 30 years but i'd rather not place a single bet on it

Thrugelmir

Prism said:

Username999 said:

Albermarle said:

The FTSE100 (I know not the best index) is currently below the high of the Dot.Com bubble.

Another good reason to be invested globally and not with overconcentration in one index .

To be fair to the FTSE 100 , the dividend payouts are high by global standards.

Come back in 30 years time and we'll see.
And how does one invest "globally", buying into 4000 stocks you know nothing about, with weightings you don't understand?
That prop up undeserving stocks.
Oh yes I know, if the charges are 0.22% per year, it's a good fund (for the financial industry). 
The FTSE100 is very 'global'.
 
IMHO

Most people don't understand any of the companies in the FTSE 100 either to be fair. They know the names and roughly what they sell but that is it. The FTSE 100 is reasonably global but lacking in a couple of sectors. I have no idea if the UK economy will roar back into action over the next 30 years but i'd rather not place a single bet on it

Even less about how good the UK is in the smaller cap tech sector. 

Notepad_Phil

vulcanrtb said:

Has anyone considered temporarily reallocating their pension to 100% cash until things improve? I'm near retirement and this is bothering me just a bit!
Obviously there's a risk that I'll save on some losses but will in all likelihood mistime the reinvestment into equities.
Thoughts?

I'm in retirement now and have absolutely no intention in doing anything like this, but that's because I did some forecasts based on some pretty pessimistic set of factors before I was happy I had enough to retire on e.g. before retiring I made sure we could cope with an immediate 50% drop in markets and dividend income with only an inflationary recovery from then on.

If you are dependent on selling down your funds to provide your income and you're at a high withdrawal rate or are buying an annuity then I can well imagine that you might be looking on with some trepidation. I hope to have reduced our dependence on high market values by diversifying across the globe and taking my income from the natural yield provided by the funds we are invested in (though we do have a stash of cash stored away, this did not come from selling down any of my equities).

Presumably you hope to be in retirement for the next 30 to 40 years, so there'll be many more times when the market falls by even more than the limited amounts it has fallen over the last few weeks. Provided that you are sensibly diversified (e.g. don't have all your funds in one country) and have a sensible drawdown plan then historically your portfolio will recover - though you may need to batten down the hatches if you are sailing too close to the wind.

dunstonh

Username999 said:

dunstonh said:

Most crashes (and this is not a crash yet) recover within 6-12 months. Even the extreme ones tend to be only a handful of years. 

The FTSE100 (I know not the best index) is currently below the high of the Dot.Com bubble. 
Yes ignoring dividends.
So yes it recovered 15 years later, but not "within 6-12 months"!!
And yes I was invested though the 90's (since 1984).
And back then the famous Vanguard Funds didn't exist.
All though 2000 to 2003 the "experts" were saying the same, "time in the market" because they were/are paid to say that.
IMHO. 

People who invest are unlikely to invest in the FTSE100 by itself.  (and if they are, they shouldnt).   One of the reasons the FTSE100 is a poor performer in terms of growth is the level of dividend payments from the larger players in particular.   It is total return that matters to investors.