Pension dropping suddenly

happymum37

Hello

Hubby panicking.  His pension with aviva has tanked since early Dec.  It had 124k in it and dropped to 122k in a week.

He has 5 investments all equal 20% and all high risk funds. He's almost 48 and  we decided to do this as his pension wasn't growing at all.

He's panicking and saying he should change investments.  I have said he needs to stay put 

Please help.  Utter novice here

Thank you
Helen

Voyager2002

His pension pot has fallen by less than 2 per cent, which is hardly "tanking". High risk means that the prices of units move up or down quite a lot, and so this kind of change is to be expected.

Anyway, you are obviously unhappy with this level of volatility, and so for your own peace of mind it would be better to choose lower-risk funds: obviously this means that the chance of high growth is reduced, as well as the chance of losses. Or you might consider keeping some of the pension in high-risk funds and moving part of it (or perhaps new contributions) to something more stable.

Sarahspangles

Does Aviva show performance graphs for funds? If so click on one, and set the graph to display 5 years’ data. Then decide if the last couple of weeks are normal stock market ups and downs. Assuming he only plans to invest until minimum pension age, he’s still got nine years on a rollercoaster. It’s best not to look.

Hoenir

happymum37 said:

Hello

Hubby panicking.  His pension with aviva has tanked since early Dec.  It had 124k in it and dropped to 122k in a week.

He has 5 investments all equal 20% and all high risk funds. He's almost 48 and  we decided to do this as his pension wasn't growing at all.

He's panicking and saying he should change investments.  I have said he needs to stay put 

Please help.  Utter novice here

Thank you
Helen

Generally, the higher the potential reward of an investment, the higher the risk. It’s like choosing between a kiddie's roller coaster and the stomach-flipping mega coaster. One’s a smoother ride, but the other might give you the thrill of a lifetime (or make you lose your lunch). 

A £2k fall is no where near "tanking".  Risk comes in many forms. Not all are equal. Taking one in particular, Market Risk.  This is the chance that the entire market takes a nosedive. Think of it as the weather of the financial world – sometimes it’s sunny, sometimes it storms.

Post up the portfolio and allow the forum regulars to provide a broader perspective. 

QrizB

happymum37 said:

Hubby panicking.  His pension with aviva has tanked since early Dec.  It had 124k in it and dropped to 122k in a week.

Dropped by £2k? That's barely a wobble. One of my funds is down almost double that.

happymum37 said:

He has 5 investments all equal 20% and all high risk funds.

How would he react if the £124k fell by £50k? That's the sort of drop you'd expect to happen occasionally with high-risk funds.

happymum37 said:

He's almost 48 ...

So he doesn't need his pension for another decade or more?

Pat38493

happymum37 said:

Hello

Hubby panicking.  His pension with aviva has tanked since early Dec.  It had 124k in it and dropped to 122k in a week.

He has 5 investments all equal 20% and all high risk funds. He's almost 48 and  we decided to do this as his pension wasn't growing at all.

He's panicking and saying he should change investments.  I have said he needs to stay put 

Please help.  Utter novice here

Thank you
Helen

The US stock market took a fall of about 3% or so on one day last week, but it partially recovered again a couple of days later.

If you think of a loss of 2K on 124K as "tanking", he probalby needs to do a bit more research on how high risk investments behave.

Is he planning to access the money in less than 10 years from now?  If not then I wouldn't worry about it - there have been a few times in the past when high risk equity funds went down by 20% or even more than 40%, but they always eventually recovered again, and achieved higher long term growth than other investment types.

What are the funds that he is invested in - are they global diversified trackers or similar?  Those would have fallen by a copule of % last week - mine did as well.  I am 56.  Not concerned about it as this is not even close to the largest correction that you will see at various points in the past and future.

Also keep in mind that if you sell now, and buy lower risk investments instead, you have crystalised the losses.  Up to now you have not lost anything as it's just a paper loss.

Notfarfromtheborder

Mine 'tanked' £11.5K last week, it, however, is still £20K over where it was three months ago. Was circa £600K so down a similar % to OP. Depending when you switched into these funds you should have seen some ups over the past few months if globally (US especially) invested, UK has not fared so well over the past three months

As previously mentioned, such a swing is not out of the ordinary

DRS1

A week is a short time when he has perhaps 17 years till retirement.  It is easy for us to say DON'T PANIC  but I know from personal experience (selling on 18 March 2020) that it is hard to resist  the urge to sell before things get worse and you may regret it later
For what it is worth I had a policy with Aviva and this summer I used it to take a tax free lump sum and buy an annuity so I was watching the figures move nearly every day
On 2 August the policy was worth £146K
Two days later £145K
Two days later £142K
Six days later £143K
One day later £145K
Yes I thought about cashing out at £142 but I didn't. Maybe I learnt something from 2020

incus432

Has hubby not been investing long?  Most of us have experienced drops of 20 or 30% at some time and it may happen again. If he panics at a 2% drop he should ask himself if he can cope with the slings and arrows of stock markets and if he is in the right funds for his personality.

dunstonh

Hubby panicking.  His pension with aviva has tanked since early Dec.  It had 124k in it and dropped to 122k in a week.

That is not "tanked".  Its a minor drop.  Its a tiny -1.6%

A stockmarket crash is deemed to be at least a 20% drop.  -1.6% is just noise.  -20% would be almost £25,000 down.   And he will see one of those soon enough.  Its not a case of if but when.

High risk investments can lose 50% in a year.  There have been three above 35% in the last 25 years.  If he cannot handle 1.6% then he either needs to learn more about investments or change the investments.

The biggest risk with investments is the investor themselves making bad decisions due to a lack of understanding. It's known as behavioural risk. 

kinger101

As others have said, there was drop of about 3% one day last week in the US.  On the back of a very strong year and quarter.

I'd say your husband's portfolio faired well if it dropped less that 2% as a result of this.

He's about 20 years away from state retirement age, so a high equity allocation makes sense.  It would be reasonable to expect two or three drops of greater than 20 % in that time, but over the long term, the stock market is likely likely to offer better returns than gilts and bonds.

I look at it as an opportunity for my next monthly investment to purchase at a lower price.