While the last 3 months may have given investors some concern, well managed and broadly based pension funds have performed well over time. The charts below illustrate the market setbacks which commenced in March this year. The initial impact was sharp, but the negative was quickly modified by strong recovery in late March and April. Some investors were able to capitalise on the weaker market prices during March, by buying into the market further.
Why long-term investment is good
For the majority of pension holders and investors, staying invested over the long term will be the most rewarding strategy. The charts below illustrate how the longer-term investor has been rewarded in one of the most popular pension funds in Ireland.
Warning: Past performance is not a reliable indicator of future performance.
Warning: The value of your investment may go down as well as up.
Diversification – a key element in the success of delivering long term returns.
You may be hearing the term ‘diversify your funds’, and wondering what does it actually mean? Diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets. So, in short, diversification in your pension fund means you are invested in a wide range of assets, in different market sectors across the world.
The main assets used in these funds are equities, government and corporate bonds, property, and cash. The allocation to each asset differs with fund managers. And as you have seen from the above graph, some managers have delivered better returns for your money over the long term than others.
It is important that you review the investment strategy of your Pension Fund, the closer you get to retirement, to avoid over exposure to volatile assets. You and your Financial Advisor need to ensure that the assets your pension fund are invested in, are appropriate for your desired outcome! For example, you may not want significant volatility with your funds’ performance close to your retirement date.
At Murray & Spelman we do this by providing ongoing service and communication with our clients. This is to make sure the asset allocation in the funds you are invested in will continue to match your Investment objectives.
The Principles of Long-Term Investing (Pension Funds)
At Murray & Spelman we have created a specialised approach to assess our clients preferred Investment strategy.
Not only do we assess our client’s circumstances by spending time to get to know them, we assess their attitude to risk and more importantly their capacity to take on risk. As part of our process we spend time educating our clients by discussing these important investment principles:
- Stay disciplined – do not panic when the markets are volatile
- Recognise that volatility is part of investing
- Investing in Cash will cost you money – interest rates are likely to remain low for many years to come
- Over the long-term, holding money in growth assets will be rewarded (equities & property)
- Diversify, Diversify, Diversify – invest in a basket of different assets
In summary, we encourage you to talk to a Financial Advisor. If you would like a second opinion, now is a good time to assess and review your own retirement plans and financial circumstances. We can assist you to build and manage a pension portfolio based on the above principles. In these uncertain times it will provide you with peace of mind.
Contact Murray & Spelman
If you would like to learn more or ask specific questions, please contact us below.
Contact Murray & Spelman Financial Services Ltd over the phone or by email, to find out more and receive a complimentary consultation.
Murray & Spelman (Financial Services) Ltd help you plan for your future, while you live for today!
Murray & Spelman Financial Services Ltd is Regulated by the central Bank of Ireland. All details and views contained within this article are for informational purposes only and does not constitute advice. Murray & Spelman makes no representations as to the accuracy, completeness or suitability of any information and will not be liable for any errors, omissions or any losses arising from its use.