Value of pension is freaking me out

[Deleted User]

borland01 said:

DT2001 said:

borland01 said:

Great thread. I was in a similar frame of mind to the OP when I came looking for guidance, but comments above have helped me get some perspective.

Just to fill in my fact pattern a little. I have 3 pension pots (I'm only contributing into one of these at present) but my biggest percentage fall in December 21 - Jan 22 is in my largest pot, which is one I'm not contributing to. So in that sense I'm not benefitting from the fall in prices in the same way as I would if I was still making contributions.

When I look at the individual funds I'm invested in, one (60% of pot) has performed in the 1st quartile over 3, 5 and 10 years, but has dropped to 4th quartile when assessing over 1 year. I'm less concerned about that one as it might just be a short term deterioration in performance.

The second (40% of pot) has consistently been in 4th quartile over 1,3, 5 and 10 years, so I was thinking that one might be a good idea to move out of.

The performance data is coming from the fund factsheets on the Aviva website. 

Am I being too simplistic in thinking I should move out of the second fund, and if I do, where do I find the equivalent data for other funds (in a user friendly comparable format)?

Thanks for any help!

I would be doing more research into both funds. It might be that the smaller one will perform well in the coming months/years while the larger doesn’t do as well. Overall the combination might be good to see steady growth as you are well diversified.

My SIPP has been available to drawdown since I put in a lump sum (90% of contributions) almost 7 years ago (so invested in relatively less volatile funds). It was split into 3 pots and was overall down 7% nearly a year later (Greek Euro Crisis followed by Chinese intervention in the markets) however overall the pots have returned 7% p.a. on average from day 1. The 3 pots have performed differently but overall are achieving the goals I had so I have only made minor tweaks along the way.

When I was younger I invested in individual shares and overall made good returns BUT remember the mistakes I made more clearly. Try to keep an eye on the end goal.

I'm 60% in Baillie Gifford International FP and 4)% in Blackrock (50:50) Global Equity Index Tracker FP. In the Aviva factsheets they are marked as 7 and 6 (on a 7 point risk rating scale) and I am around 15 years out from retirement. Like many I'm happy to take the upside but the downside risk is less palatable :-)

 Looking at the two investments, it's the Baillie Gifford one that's creating most of the drop (13% down since end November).

Assume you have 60% in the Gilford fund and 40% in the world tracker.  Not clear from your comment. 

Here is my opinion:

1. Looking at the Gilford fund, its diversified between companies (no  company has anywhere near 5% weighting). It is also well diversified between sectors and regions. 

2. Their top holdings raise eyebrows. Unexpected names.  Bets. Then again, thats what an active fund is supposed to do. 

3. Looking under the bonnet, its clear that Gilford is a growth fund which deliberately shuns value.  This strategy has worked very well over the last 10 years but tends to underperform long term.  Indeed, the fund outperformed the benchmark over the last 10 years. As one would expect. 

4. When investing for pensions your timescale is multiple decades.  Over 50 years, on average.  Five years is too short a time period to be meaningful in this context.  A few months periods are completely meaningless.  20 years would be more like it but the fund hasn’t been around that long so you have to understand investment style behind this fund and look at how it performed. 

5. Time to understand the fund is before you put your hard earned money in it.  Most people spend a decent amount of time researching a 50 pound gadget on Amazon before they buy it.  50K should increase your research by orders of mag. Why are you questioning your investments now? Has anything changed? Your circumstances? Fund managers? Investment style?

6.  If you don’t have the temperament or time for active investment then invest passively.  The vast majority of people should. 

7. What are you paying for your funds? High costs erode performance over long periods of time. 

8. I find the risk numbers are useless and often worse than that - misleading.  You really need to understand the assets you are buying and and one number can’t characterize risk. 

P.S. I used FT breakdown to evaluate composition between sectors and regions.  Assume I picked the right fund but not 100% certain. 

https://markets.ft.com/data/funds/tearsheet/summary?s=GB0001532273:GBP

MarkCarnage

It's Baillie Gifford, not Gilford.....

Regarding your comments......

Point 2 - yes, it's pretty different from the index. It's meant to be.....and the OP has about half his fund in an index fund anyway. One could debate what the relative proportions in each should be.

Point 3 - yes, the BG house style is growth. They've outperformed most of the growth sector too until very recently. I don't think one can state categorically that 'value' has outperformed 'growth' as it depends very much on the time period measured, the markets used and the definitions used. It becomes even less helpful at the fund level. 

Points 4-6 generally agree. 

Point 7 - BG fees are among the lowest for active funds that I know. The link you have shows that the AMC is 20bps  and total expenses 25bps. That tallies pretty much with what Scottish Mortgage IT charges.

Point 8 - agree, agree, agree! For me, risk is permanent or at least long lasting loss or significant decrease in capital value in real terms. Not just some short term volatility measure.

[Deleted User]

Point 2 - yes, it's pretty different from the index. It's meant to be.....and the OP has about half his fund in an index fund anyway. One could debate what the relative proportions in each should be.

Putting 60% of ones retirement safety fund  into an active fund could be reasonable if you know what you are doing. Deeply. With education and meaningful  research.  And even then would be questionable. 

GSP

Interesting article on the front page of the FT today.
I haven’t got a link, but here are some headlines from it.

Netflix lost $48 billion on Wall Street’s opening bell yesterday in a latest blow to a tech sector that has hit the buffers after powering markets through the dark days of the pandemic.

Shares in the company tumbled by about a fifth after the streaming service said late on Thursday that’s it’s subscriber growth would cool early in 2022.

The sell off added fuel to this week’s decline across global equities markets that left the FTSE All-World Index down about 3 percent.

Fast-Growing companies that prospered in the depths of the pandemic have endured a torrid start to the year as surging bond yields dent the allure of the hefty cash-flows they are expected to generate in the future.

There are now signs that the tech rout is spreading to other parts of the equities market. More than 300 stocks listed on the blue-chip S&P 500 Index are down at least 10 percent from recent highs, while more than a 100 are down at least 20 percent, Bloomberg data show.

“Some kind of contagion from tech to the rest was inevitable”, said Luca Paolini, chief strategist at Pictet Asset Management. When you have these kinds of losses they affect sentiment and everything else goes down.

I’ll paste this on the other similar performance thread currently running alongside.

I think in my very short time of seeing performance, I’ve seen a couple of sharp dips, particularly March 2020, but these recovered after a relatively short space of time.
This gradual decline however is new to me and my untrained self believes any recovery will take a while longer than the above.
This may be backed up from the mention above of Netflix subscriber growth cooling in early 2022 and the effect of that. Quite what happens in Q2 may be quite pivotal as we go on, but I cannot see anything turning, maybe declines still until April at least.

Thrugelmir

GSP said:

MarkCarnage said:

I think it's important to understand that the BG funds are not the same as out and out 'tech' sector funds. Long duration growth, absolutely, disruptive business models, definitely, companies using innovative technology, most definitely, but very often not the 'tech' providers themselves, at least in the narrow IT sector definition. 
I'd be more worried about Chinese political influence on some BG holdings than tech......that's what's worrying them. 
There is also a bit less concentration now in a fund like Scottish Mortgage than there was a year or so ago.
However, there philosophy remains based on identifying a few really big winners, where the share price will move factorially. That will also mean some big failures, but if out of 10-20 stocks they identify 1 or 2 of the next Amazon, Google or similar, have another couple of moderate successes, it probably doesn't matter what the rest do. When bought, each holding is usually 1% or so of the fund, sometimes a little more, sometimes less.....the 5-10% holdings come from that, and aren't bought at that size.  

I'm not surprised that they've taken a bit of a hit:

- for the investment trusts, premiums to NAV have moved to discounts
- all long duration growth has taken a hit due to discount rates rising
- BG said themselves a year or so ago that COVID had compressed several years expected gains into 6 months....or something similar. 

Add to that, there has been a lot of quite hot money going in there, some of which is probably heading out again.....from those who  shouldn't have been there in the first place. These things are cyclical, as others have said. 

Being cyclical, when annual reviews come round should these likely worse performing investments in a portfolio be replaced? Or would you stick with them until they recover somewhat?

Investments are made after thorough fundamental research into the company, the management team etc etc. Normally with a 3-5 year view at the minimum. Investing isn't a numbers game which is based on the amount of money that's piling into a stock or indeed being withdrawn. The media drives momentum as far as retail investors are concerned. Creating no end of mantras that get bandied around with increasing frequency.  

kinger101

I don't see the point in getting worked up over a single stock which is back at the price it was four years ago.  Almost everyone who has it in their pension portfolio via a fund or even a single stock will have been up overall on Netflix, as they would on any of the Baillie Gifford funds that are being mentioned on here.  It's no secret that tech stocks are volatile.  

Madrick

It certainly is squeaky bottom time for some
My S&S ISAs, & small pension with Nutmeg, along with 2 pensions with Aegon seem to be falling at an alarming rate...and very similar pattern

But still worth a lot more than they were  last April 😁

A % drop to a of pot worth a couple of hundred thousand, is considerably less than a pot worth a million. 

Thrugelmir

Madrick said:

A % drop to a of pot worth a couple of hundred thousand, is considerably less than a pot worth a million. 

More likely somebody with a pot worth a million is closer to retirement. Those with time have the opportunity to continue to invest further monies. Has been an exceptional run that was never going to last. 

[Deleted User]

Ok, so I checked what all the fuss is about.  Down 4.5% from the top of the market (less if counting from month end).  Not even 4 Honda Civics.  Just a bit of froth finally came off the top of the market.  Wake me up if and when S&P500 is down 50%.  Then I’ll be a buyer, on margin if necessary. 

Some kind of contagion from tech to the rest was inevitable”, said Luca Paolini, chief strategist at Pictet Asset Management. 

Cool, I like financial p o r n.  Here is a whole collection of guilty pleasures: https://www.marketwatch.com/story/the-road-to-fresh-stock-market-highs-is-littered-with-these-awful-correction-calls-2018-08-28

swindiff

Baille Gifford American is down around 30% this month.  It makes up a small amount of my wife's SIPP.  No point panicking just an opportunity to buy more at a lower price and hope it recovers to previous levels in the longer term.