SIPP investments during market upheaval

timww

I've just opened a SIPP with AJ Bell. I did this mainly for tax reasons (sole company director), and NOT because I know what I'm doing with investments.

I'm relatively comfortable with the general advice out there for portfolios, and I'm ready to push the button on a core holding in a tracker fund. However, the current situation in the middle east makes me unsure whether to hold off.

I have my current year's 60k allowance transferred into the account and ready to invest. Some googling suggests phasing/staggering this over several months. Other opinions are to go all-in, and avoid sitting on too much cash.

What do you think? Hold tight, phased buy-in, or get it over with?

Georgemc

Lump sum statistically beats dribbling it in over a period. Honestly, I'd just ignore the news when considering this. The sooner you get the money into the right assets, the more time it has to grow. If you would be happy to invest all of this money now, if there wasn't market turmoil, then just do it anyway. Hint: There is always market turmoil, always some event going on that gives you pause. Ignore it. As long as capitalism continues to function, owning globally diverse equities will trend upwards. And once the money's in there, don't keep checking on it! Do not let current events put you off, seriously.

If you want to research more, google "lump sum vs DCA". DCA = dollar-cost averaging, and is the strategy of phasing your contributions. There's some evidence that you might manage to buy some equities at a discount, but you're trying to second-guess the market at that point. Forget it. Invest the lump now, buy your chosen assets and ignore the account for a while. Are you aware that you can carry forward 3 previous years' pension contribution allowance too?

Picnicker

Who knows? It depends on your appetite for risk and how much you are can afford to lose. And maybe how old you are. Lots of factors. If it was me I would probably hedge my bets by going in gradually. Do keep educating yourself, though, check what charges you are paying and don't believe anyone who is certain they know best.

dunstonh

I'm relatively comfortable with the general advice out there for portfolios, and I'm ready to push the button on a core holding in a tracker fund. However, the current situation in the middle east makes me unsure whether to hold off.

There are always situtations going on. Often multiple. Some get heavy coverage, some get little or no coverage. There is nothing going on at the moment that changes a single thing.

I have my current year's 60k allowance transferred into the account and ready to invest. Some googling suggests phasing/staggering this over several months. Other opinions are to go all-in, and avoid sitting on too much cash.

Statistically, that results in lower returns in the majority of cases. Plus, it doesn't get away from the fact that once you phase over several months, you are still fully invested. At that point, everything is subject to investment returns. You're only putting off the inevitable.

What do you think? Hold tight, phased buy-in, or get it over with?

Investment risk is a sliding scale. If you take a typical 1 to 10 scale, you appear to be going in at 10. Maybe you'd be better with something lower than that. The average UK consumer is around five or six on that scale. So at the moment, it seems that you believe you are much higher risk than that, but your comments suggest otherwise.

The choice of a single global tracker leaves you with a loss potential of 50% over a 12-month period.Can you handle your money halving in value? A one in a hundred year event could see it fall by 80%.

Albermarle

SIPP investments during market upheaval

There has not been, and currently there is no 'market upheaval'

100% equity fund will be flat over the last 3 months (and still 25% up over the last 12 months ).

There is some nervousness as always. Before the Iran situation, all the talk was about overvalued tech stocks. In 6 months we will be worrying about something else.

Aminatidi

I'd take a bit of time to consider dunstonh's comment on risk.

Maybe you truly have a 10/10 appetite for risk but many people don't (I know I didn't despite thinking I did) and sometimes a bit of reflection about your real appetite for risk will see you where are now or it might see you somewhere different on the scale.

timww

Just to be clear on my risk appetite: The tracker fund investment I'm referring to here is not going to be 100% of my portfolio. The fund I'm looking at will probably be something like 60% of my available cash. I'll be adding other defensive investments, but not so worried about the timing of those.

Georgemc

https://forums.moneysavingexpert.com/discussion/comment/81961164#Comment_81961164

How far from retirement are you? There's really no need for anything like 40% in defensive instruments unless you're getting close and worried about sequencing errors. Bonds don't cushion the blow as much as you might think, and they mostly serve to reduce your returns on a long timeline. The idea behind 60/40 splits on equities and bonds came from old school pension advisers because for some time, bonds performed differently to equities: equities fell, bonds rose. 2022 threw egg on all their faces because both asset classes plummeted at the same time, at about the same rate. Increasingly there's strong evidence for 100% equities until you're close to drawdown. Diversity across asset classes is somewhat a security - or is that securities? — blanket to stop you panic selling.

GeoffTF

https://forums.moneysavingexpert.com/discussion/comment/81961164#Comment_81961164

Nonetheless, you are worried about having 60% equities. That seems to indicate that 60% equities is too much for you. Could you cope with 40% equities?

cece_3

Hi!

I did the same, and some years ago, I asked a retired friend who has a great track record with investments, and he said -Put it in one go, but invest it monthly or bi-monthly across a set of investments. Takes a few minutes but spreads the risk so you occasionally buy high and low. Hope this helps you

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81961319#Comment_81961319

 Diversity across asset classes is somewhat a security - or is that securities? — blanket to stop you panic selling.

Exactly this. It is better to be in a 60/40 and hold on, than be in 100% and panic and sell at the bottom.

So 60/40 ( or similar) is not just for people approaching retirement, but the majority who class them selves as somewhat risk averse.

Every time the market drops just 10%, this forum is full of new threads from worried people. In most cases they have been invested above their risk tolerance.

Of course 100% equity is more than likely the right choice for some people, but not everybody for sure.