Should i take any action?

Leigh-Anne_60

Hiya

First of all apologies in advance for any dumb Qs - my knowledge in the pension field is lacking to say the least:o

I have a Friends provident stakeholder pension which has been going for about 3/4 years. I was shocked to see in my recent annual statement that the fund loss for the year stood at £1264! The total fund value is 11K - so thats over 10% drop- or equivalent of over 4 monthly contributions. Is this normal? Or abnormal but to be expected in the current economical climate?

I cant do anything about being with FP as its a company scheme(2/3 contributions from employer) - But should i be looking at changing funds? When joining i just opted for 100% stewardship managed - was all too complex for me at the time

Or should i leave it as it is. If it makes a difference i am in my early 30's so have no plans (unfortunately) of retiring anytime soon

Cheers

LA

EdInvestor

Leigh-Anne_60 wrote: »

I have a Friends provident stakeholder pension which has been going for about 3/4 years. I was shocked to see in my recent annual statement that the fund loss for the year stood at £1264! The total fund value is 11K - so thats over 10% drop- or equivalent of over 4 monthly contributions. Is this normal? Or abnormal but to be expected in the current economical climate?

The prcie of shares may go down as well as up.Over the long term (25 years) you expect the trend to be up. So a 10% drop is quite normal.

But should i be looking at changing funds? When joining i just opted for 100% stewardship managed - was all too complex for me at the time Or should i leave it as it is. If it makes a difference i am in my early 30's so have no plans (unfortunately) of retiring anytime soon

If you want to take less risk you could switch some of the money into bond funds.But for someone of your age with a long way to retirement it is better to be mainly in shares. You could consider a few more funds than just the one however.

What other choices are there?

Leigh-Anne_60

Thanks for that Ed from Annies thread i found this link http://customer.friendsprovident.co.uk/fund_centre/pension_funds/performance/index.jhtml
assume these are all avail to choose from, but this is where i get lost - When i joined stewardship was 'middle of the road' risk level from memory? But appears med-high now which i dont mind really? but should i spread it out a bit?

Also i said 10% drop - But being an annual loss of £1274 against annual contributions of approx £3600 - Should this be calculated as a 33% loss

LA

dunstonh

I was shocked to see in my recent annual statement that the fund loss for the year stood at £1264!

The FTSE dropped just over 20% in the last 6 months although in the last month it was recovered around 8% of it so your loss is quite expected and quite normal.

With equity investments they zig zag and every few years you expect 20% or so losses. Every 10 years or so you can expect 40% losses. However, in between you get years of growth so you have to average it out.

When joining i just opted for 100% stewardship managed - was all too complex for me at the time

100% in one fund is never good investing. Its eggs all in one basket.

Also i said 10% drop - But being an annual loss of £1274 against annual contributions of approx £3600 - Should this be calculated as a 33% loss

No, its not a 33% loss. Remember those contributions were buying units each month at much lower prices than a year ago. The recent recovery has seen those ones make money. Having drops like this in the early years is great news for those paying long term regular contributions.

Dick_here

dunstonh wrote: »

100% in one fund is never good investing.

It is if you pick the right fund !

bigbloke45

What you are experiencing is called "pound cost averaging"; this is a posh phrase for saying that you buy more units as their price falls, but should make money when the unit price rises as you have more units in your plan from having bought them more cheaply previously! (technically, it's a bit more complicated in case I get roasted by some of our other posters!)

The main point being that it may be better to invest in a series of regular amounts than "one-off's" since "timing" the market is impossible.

So, stick with it!

Good luck.

bigbloke45

!!!!!!_here wrote: »

It is if you pick the right fund !

I'll buy your Crystal Ball off you for a £Million!:rotfl:

bigbloke45

Just a bit of comment about the Stewardship Managed Fund.

FP's fund is an "Ethical" as opposed to a "Sustainable Investment Fund". This means that FP will "screen" all companies that it could invest in via the fund to ensure that they meet the criteria laid down e.g tobacco, armarments would not be included. Then, after this screening, FP will then "do the numbers" on the prospective companies to invest in to see if they meet the criteria for being worth investing in.

The point being is that the initial "screening" creates a fund that is not aligned to the market (i.e it will not have it's holding near to the weightings in the All Shares or any other index available for comparison).

This means that it is riskier than other "Managed Funds" which do not have the initial screening. This ALSO means that sometimes ethical funds will do better than mainstream Managed Funds, when the "skewed" fund's shares outperform the market and, at other times the reverse will be true.

I hope this helps.

Retired_I.F.A.

Cmon Big bloke I thougt you knew that pound cost averaging is nothing but a salesmans ploy. Read the wilkepidia truth.

bigbloke45

Retired_I.F.A. wrote: »

Cmon Big bloke I thougt you knew that pound cost averaging is nothing but a salesmans ploy. Read the wilkepidia truth.

OK, I put my hands up! I was trying to reassure the OP. What about the old investment adage "Buy into a falling market, sell into a rising market" Will that do?

As an aside, I did see a paper from the Institute of Actuaries (Student's site) that did prove that pound cost averaging does work. It was one or two pages of impenetrable formulae and the conclusion was that, it might work in the particular case in question, but was not proven universally!

Your'e not going to let me get away with anything, are you!:rolleyes:

Retired_I.F.A.

Nope :P

First time I was " introduced" to pound cost averaging was at a seminar of insurance salesmen long before the FSA came about. There I was sitting at the back in an audience of 300 plus as they applauded the companies top salesmen for the year introduced on stage. Each had a few words of "wisdom" to give the audience and when one guy complete with an overhead projector started on about the merits of pound cost averaging pointing to his graph on display I shouted out "Now draw the bloody line as if it were upside down you bleedin conman"
Boy was I popular !