What to do....

Brenster

Just after peoples thoughts....... I have a scottish widows pension, it is no surprise to that it has / continues to be taking a hit, aprox 20% in the past 6 months.  I pay into this pension quarterly, and it is getting to the point i would normally make an investment, but i cant help thinking i would be best leaving it in the bank until the dust settles (if it ever does).  Some say now is the best time with the unit costs low, and whilst i understand this point, i cant help thinking it seems stupid to be putting money into something that seems to be in freefall.  At least leaving in the bank will keep its value (ignoring inflationary erosion).

shortseller09

Please read numerous recent posts on exactly the same thing.

sheslookinhot

Why would you ignore “inflationary erosion”? Reported to be around 10%. That could have a bigger impact than any further effects to the stock market.

dunstonh

  I pay into this pension quarterly, and it is getting to the point i would normally make an investment, but i cant help thinking i would be best leaving it in the bank until the dust settles (if it ever does). 

When the dust settles?  i.e. when investments have gone back up again and you missed out on the lower investment prices?

 Some say now is the best time with the unit costs low, and whilst i understand this point, i cant help thinking it seems stupid to be putting money into something that seems to be in freefall. 

Yet nothing indicates that the current falls are in freefall.  It doesn't make the top 5 falls in the last 25 years year.

What did you do in all of the previous larger drops?

At least leaving in the bank will keep its value

Are you not forgetting tax relief on pension contributions?  That alone buys you a stockmarket crash.

bostonerimus

Look at you finances and make sure you are doing sensible things, so pay off high interest debt, make sure your emergency cash fund contains at least 6 months spending, do a budget and see where you can save and keep paying into your pensions and ISAs.

Linton

How long before you retire?  If it's several years away the recent fall is irrelevent.  Sure, if  you sold now you would get less than if you had sold a few months ago.  But presumably you werent planning to sell now anyway so why does it matter?

If your pension is invested sensibly no way can it be in free fall.  Before the recent falls your pension probably held shares in major companies throughout the world  such as Microsoft, Google, Apple, Toshiba, Unilever, Shell, BT etc etc.  It still holds much the same shares.  Each share represesents ownership of a small fraction of each of those companies.  Your pension will gain from the future profits of these companies either directly through dividends or indirectly through the reinvestment.they make.

For your pension to dwindle to zero the world's major companies would need to become worthless.  In such global economic meltdown circumstances your pension would be the least of your and the world's problems. Your cash savings would be irrelevent.

You are now being given the opportunity to buy into the worlds largest and most profitable companies more cheaply than in recent months.  And you want to wait until they are more expensive?

Brenster

Thanks for the responses, as i said i kind of know the pros and cons just wanted some opinions.  For the record it is 16 years till i can access so i am in it for the long haul, think the answer is to continue to invest and 'lose' my password so i can stop checking the value so often  !!!!  

dunstonh

Brenster said:

Thanks for the responses, as i said i kind of know the pros and cons just wanted some opinions.  For the record it is 16 years till i can access so i am in it for the long haul, think the answer is to continue to invest and 'lose' my password so i can stop checking the value so often  !!!!  

In which case, this is great news for you.  Plenty of time for these cheap units you are buying to go back up.    And remember it next time it falls as you will probably have three more crashes in the next 16 years.   And if you do drawdown in retirement with another 25-35 years of investing, then twice as many again.   You will get to the point where you shrug your shoulders and say "here we go again".