“When stock markets and other investment markets are fluctuating it’s natural to think about how this may impact your pension and other investments. The fact that the FTSE 100 passed through the 8,000 milestone for the first team this spring just four years after the covid crash shows how short and medium-term concerns, despite seeming all-encompassing at the time, tend to more than balance out when it comes to long-term investing. The general consensus is that if you don’t need to sell your investments, it’s usually best to wait for the natural recovery of the markets before considering your next step. Movements up can be quick, and a big risk of reacting in the short-term is missing the best days which can have a big impact on returns in the long run. It’s always good to keep a long-term perspective and remember that investments like pensions are accumulated over many years and are likely to see some ups and downs along the way.”
Dean Butler on key things to think about:
1. Think longer term - History has shown that over the longer term (usually more than 10 years) markets have risen in value. So consider how your investment has done over the longer term, rather than focussing on short-term falls.
2. React and you may regret it - If you panic and sell, you’re likely to be selling after markets have already fallen and, importantly, before they rise again. That means you’re not only locking in your losses but also missing out on the eventual recovery - so you’re feeling the pain of loss twice.
3. Check where your pension is invested - If you’re in a low involvement pension option, then it’s likely that your money is being spread across different types of investments and countries, as this helps smooth out the returns you get. This is because different investments tend to go up and down in value at different times and are affected in a variety of ways by factors such as economics, politics, and conflicts. This is what’s known as “diversification”. Some low involvement investment options, often called lifestyle profiles, may also reduce the level of investment risk that you are taking as you approach your selected retirement age, helping to protect you from market falls when you have less time to wait for markets to recover. However, if you select your own investments, you might want to check the assets you’re invested in. Your pension provider may have online services that allow you to check the value of your plan.
4. Has your attitude to risk changed? - If you’re uncomfortable seeing large movements in the value of your plan, you might want to consider lower risk investment options, but be aware that these types of investment typically offer less growth potential so you should consider how this might impact your ability to achieve your goals. Most investment options have some sort of risk or volatility rating that can give you an indication of how much your option may move down and up in value.
5. What are your circumstances? - You should consider all these factors in relation to your own circumstances. For example, you might be some way from retirement, about to access your pension money for the first time, or already taking money from your pension plan.
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