pension

kempiejon

dannybbb said:

i realise there is no crystal ball  but  i wonder with pensions (specifically as a self employed person with a sipp  invested in 2 hsbc global funds) would there ever be an event where you decide to move your investments to something more stable. Im reading too much about how the stock market is overvalued as well as all the instability in the world.

I get that  the idea is just invest and forget about it bit as someone with next to no experience I just wanted to hear if there are any circumstances that would make you switch out your investements for something with less risk? Guess my concern comes from putting  quite a lot of cash in over the last 9 months (55k) and at 50 not a huge amount of time for things to recover if things tank

im invested in my pension more for the tax benefitsmore than an expectation of a big growth in value providing it is in line with inflation. would i be better with bonds / gilts? 

If you would feel worried about your investment falling for months and showing a value of less than you put in and if you'll want to do anything with the pot other than accumulate it within the next 10 years then your should probably be out of the stock market. You won't be able to sleep at night. Your taking a risk with your money.
Specially if you're the sort that reads about the stock market being over valued, a crash coming, rising rates, economic slowdown and the sky falling in. There are lots of scribblers writing opinions and guesses about the future which no one can know. It sounds like that makes you nervous and although you say you get it in practice it'll be a worry. 
I started with a monthly amount that was spare money and have learnt to be sanguine about market moves. I have seen some big drops. 

dannybbb

@Bostonerimus1 i would have definitely done things differently given a time machine.

 Im not worried about a housing crash, im not thinking of selling and i dont have a mortgage on it so i see it as a good income generator for when the business dries up. cash is beating inflation at the moment thankfully. I just feel  that because of my age i do need to be defensive now even though given my time again would have done things very differetly. If i hit sell on the funds i have do they just sit in the sipp (at ii) as cash?

dannybbb

ii pay 3.56% on cash balances - i would also have the taxation benefits, and see what happens in the next year or so providing its not expensive to do so

dannybbb

@kempiejon my original question was to do with if there are any external circumstances that affect your behavior, as a new investor im interested to hear other perspectives
I m happy for it to lose value but i dont have long to recover a massive loss so its at least worth asking the question is the risk worth the reward. my main objective is tax efficiencies and inflation so its just something im considering at the moment

dunstonh

When you draw on the pension, you will likely use a different investment strategy to match your drawdown strategy.   That will involve some de-risking.  e.g. bucketing the portfolio for different stages of retirement.  i.e. money you intend to spend in the next 7 years being in your short term  portfolio, 7-15 years in your medium term portfolio and everything else in your long term portfolio.   Timescale to accessing the money is key with investment risk.   

However, some people may only use two buckets or have a cash float with income units or use a yielding strategy.    

So, there are many ways in retirement but getting there is pretty much about total return.

QrizB

dannybbb said:

I m happy for it to lose value but i dont have long to recover a massive loss

You're 50. With a modicum of luck you've got another 35 years or more until you'll reach the end of your investment journey.

Over the past year, £890k in cash at 5% has earned £44.5k. £890k in VWRL would have earned £175.7k.

Being too cautious is just as dangerous to your future finances as being too adventurous is.

400ixl

Time in the market typically outweighs try to time the market and historically outperforms cash investments.

You have a lot of cash in your portfolio, how much of that not in tax sheltered accounts? I'd be more concerned about that as both inflation and tax will be quickly eating into that.

kempiejon

@dannybbb I wouldn't sell. I'm in the market as it's historical better than other options for inflation beating returns. Risk on. I saw your asset allocation and the high amount of cash in your portfolio would worry me.
We have different ideas on risk. You have asked a sample of when people would sell. I would sell if I was fretting about my investments. You've gotta sleep at night.

Bostonerimus1

dannybbb said:

@Bostonerimus1 i would have definitely done things differently given a time machine.

 Im not worried about a housing crash, im not thinking of selling and i dont have a mortgage on it so i see it as a good income generator for when the business dries up. cash is beating inflation at the moment thankfully. I just feel  that because of my age i do need to be defensive now even though given my time again would have done things very differetly. If i hit sell on the funds i have do they just sit in the sipp (at ii) as cash?

A crystal ball would be nice, but failing that long term historical data must suffice and young people with long time horizons will almost certainly do best by investing in equities and perhaps putting some away in bonds and cash to reduce portfolio volatility. Whether or not you current portfolio will work in your circumstances depends on how long you'll continue to work and how much retirement income you need. If you don't know that then do a budget and come up with the numbers.

I'm retired with a paid off BTL and a DB pension that cover my income needs. So I could follow your lead of being conservative and having a cash heavy portfolio and be just fine, but I've decided to go 85% equities, 10% bonds and 5% cash. Large portfolios and small retirement income needs gives you the luxury of choice.

Roger175

dannybbb said:

@Bostonerimus1 i would have definitely done things differently given a time machine.

 Im not worried about a housing crash, im not thinking of selling and i dont have a mortgage on it so i see it as a good income generator for when the business dries up. cash is beating inflation at the moment thankfully. I just feel  that because of my age i do need to be defensive now even though given my time again would have done things very differetly. If i hit sell on the funds i have do they just sit in the sipp (at ii) as cash?

Initially yes, they just get sold and the cash appears on your statement, where it will earn some interest, but you can then buy something with far lower risk - refer to my post above where I mentioned Short Term Money Market Funds - these are not cash, but pretty low risk funds which currently pay something approaching 5%. Do your own research, but these are very popular with people who want to hold their money within their pension but don't want to take the risk of being in equities. Typically someone following a bucket strategy, whereby they might want to hold say 2 or 3 years of money in a 'cash like' way. They are not necessarily a good way to invest when in the accumulation stage of your journey, it is only in the last few years that they have started paying a decent rate and currently one that beats inflation. A few years ago, it would have been unwise to use them when still building your pot, but at the moment as a short term measure they suit my needs.