Seeking Advice - Investment - Balancing Risk and Reward

moneysaverexplorer

Investing My Pension Lump Sum - Seeking Advice!

Hi everyone, I’ve recently received a lump sum from a final salary pension that I literally started in 1987-1995! It was sitting there all those years, and seriously couldn't have come at a better time in terms of triggering, as I have been up against a wall finanically for various reasons recently. I don't want to blow it, and exploring investment options. I’m keen to balance risk and reward while considering growing markets like rare earth minerals, India, and Vietnam - just a few example that I've picked up on.

My current thinking:
1. Keeping a portion in safer investments
2. Allocating a percentage to high-risk, high-growth strategies - instant cash draw down
3.  Looking at emerging economies and future-facing industries

I’d love to hear your thoughts! Have you invested in any of these areas? What strategies have worked for you?  Clearly, I appreciate any advice is simply that, just curious on thoughts from the forum. 

Thanks in advance.

tacpot12

I've keep all of my pension investments in relatively safe assets classes and geographic areas, although I am more adventurous than some as I am planning to spent 40 years in retirement (I started at 53!) I need to take some risk to adequately hedge against inflation, but I don't need to invest in high-risk areas. I suppose I am adopting the approach of not taking risks that I don't need to.  

masonic

Nothing wrong with taking a very high risk approach with a small part of the lump sum if you are comfortable with seeing a lot of volatility. Personally I prefer to capture broad emerging market exposure and don't try to speculate on which industry sectors are likely to outperform market expectations, but if you fancy a gamble just make sure you have a solid foundation of diversified investments to fall back on if things don't go your way.

Albermarle

You do not say your age ( presumably at least 60?) .
You do not say what your objectives are, or when you might need the money.

These things partly determine the risk level of an investment portfolio, as well as your personality.

Most of the regular posters on here, seem to stick mainly to mainstream diversified investments, so you will probably not get much positive/informed feedback about investing by selecting and hoping for high growth in Vietnam, specific industry sectors etc.

DRS1

I am sure I saw a youtube video saying India was more highly (over?) valued than the US.  This was in the context of people wanting to reduce their exposure to the US.

bobfredbob

Over the years I invested a portion in various trends based on articles telling me how this-or-that sector or continent will do well in the next decade.

My advice: don't.

I've had investments that perform worse than a bank account.  Thankfully, only a small portion of investment, but still real money.

Have a look on "justetf", find trackers for the area in which you're interested (emerging markets, India, etc.), then, on the graph, add a comparison to a broad diverse index such as MSCI World which invests a bit everywhere (though about 70% in USA) or S&P 500 (USA only).  Then see how your strategy has panned out over the last 10 years.  Also see how it coped with events such as this year, 2022, Covid, and 2008.  See what the maximum loss is.

Now, granted, ten/twenty years isn't a long time, but it gives you a recent idea of what would've happened.

A lot of people seem to recommend a world tracker, an "all world" (including emerging market) tracker, or an American tracker.  A world tracker means you're basically buying what everyone else is buying and hope they're right.  So, the idea is that if only 0.2% of the world's money is invested in a country then perhaps there is a good reason why that's the case.

Truth is, no-one knows what will happen.

For high risk, high growth, I tend to invest in technology.  Something like Nasdaq is heavily concentrated on Apple, Google, Microsoft, etc.  That justetf site has lots of very specific trackers that may interest you.

Linton

I would  split the pot according to  when the money was needed and allocate investments separately, Short term money, say 5 years or less, should be somewhere very safe near to cash. Long term money, >10 years or more could be in 100% highly diversified Equity. And medium term somewhere in between.

If I understand you correctly you are proposing to use the equity investments for instant cash drawdown. This seems very wrong to me as you could well be cashing in when prices are low. Best to keep volatile investments for the long term benefits of strong underlying growth with decreasing impact from short term volatility.

GeoffTF

moneysaverexplorer said:

3.  Looking at emerging economies and future-facing industries

Historically, emerging economies have given worse returns to overseas shareholders than developed economies. The best returns have often been given by stagnant economies. Sweden was the biggest long term winner when I last looked. Industries that people believe are future facing tend to be overpriced. We currently have a tech boom. Historically tech booms have been followed by tech busts. Nonetheless, we cannot rely on history repeating itself. Omitting emerging markets and future facing industries is not a guaranteed winner either. Spread your risk as widely as possible. Buy a global tracker.

moneysaverexplorer

A big thank you to @tacpot12 @masonic @Albermarle @DRS1 @bobfredbob @Linton @GeoffTF for taking time to respond to my post.  I can see that you are all well experienced in posting on the moneysavingexpert forum.  You have given me food for thought, for sure.  I will review, consider and research your advice.  Thanks again.