Fund Choice

One of the most common things we see with people’s pensions is the fact that they do not exercise fund switches. A fund switch is simply a request to change how your money is invested, it could be for a day, a month, a year or longer, you decide. Remember switching funds are usually free (Most companies give you several free switches a year).

Stock markets are pretty cyclical, so if you have a few very strong years, eg returns of 20% per year over a 4 year period, you can nearly expect a correction to happen in the very near future. Like wise if the markets have been absolutely decimated, that’s usually the best time to buy back in as the risk of falling lower is low and after every crash there is always a recovery.

If you get it right you will be switching your fund to a low risk fund just before a correction, and then transfer your money into a riskier fund to catch the recovery, for example the world stock markets peaked in 2007, had you transferred out of risk at that stage you would have escaped the following crash mainly in 2008 and early 2009.

By using this method you could limit your risks of losing money.

We can help you in this area and highly recommend making an appointment to show you what we can do.

Ever wondered how many years it would take your fund to double, just purely on investment return? There is a simply calculation to answer that very question, its called rule 72.

If you divide 72 by the return on your investment, that will give you the amount of years it will take to double your investment assuming the same return each year.

Example if you had a fund of €100,000 and you had a 20% return each year, it would take roughly 3.6 years for your fund to double in value. 72/20=3.6.

So if you are contributing into a pension and the fund is giving great returns, it would be quite easy to see the fund double in a short timeframe. Typical returns on pension funds are between 6% and 8% per year, but depending on the fund, some funds can actually double in one year.

If you ask 10 clients to grade themselves on a 1-5, 1 being lowest risk and 5 being highest, the majority will choose a risk level of 2. For this reason it is well worth while talking to us, we can show you how you can manipulate risk to get even higher returns. A pension fund sitting in a very low risk for a 30 year old client, may not be a good idea. Likewise a Pension fund sitting in a high risk fund for someone retiring within a year, may not be a good idea also, however it really depends on the individuals circumstances, again we can help you to make the best decision for you.

Remember that return and risk are related; normally, the higher the potential
return, the higher the potential risk. We can advise you on the options, as you are the expert in what you want, we will simply listen to your views and offer advise.

We strongly recommend getting professional advise to make sure you understand how to maximize your chances of making money in your pension. We have a diploma in Pensions and are Fully Qualified Financial Advisors. Make an appointment.