Moving pension fund to cash

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mikerd4

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I have my pension fund currently in a high risk fund thats done well over the last few years, given the current uncertainty and after reading articles like this one https://www.thestreet.com/technology/michael-big-short-burry-makes-another-dire-prediction

What are the pro's and cons of putting my current pension pot into a cash fund? Given the ecb are now pushing up interest rates slightly, or am I simply losing money via inflation despite my pot not going down?

I'm lucky I can transfer between funds freely with no charges or penalties.
 
Sorry thought I put that in, Im 44. No plans to retire before 65 as it stands.

Assets wise I have my house.

I know Im trying to guess the markets and world economics but I was thinking short term it might be a better bet to ease any potential craziness
 
mikerd4 said:
Sorry thought I put that in, Im 44. No plans to retire before 65 as it stands.

Assets wise I have my house.

I know Im trying to guess the markets and world economics but I was thinking short term it might be a better bet to ease any potential craziness
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Do nothing.

Leave it as is and keep contributing.

44 year olds with 21 years to go until retirement should be high risk/equities all the way.
 
Some clichés that have some relevance...
  • Timing the market is a mug's game.
  • It's time IN the market, not timing the market, that matters.
Also, remember that, in many cases, a retiree (not on a defined benefit pension) will probably (a) be looking at a long lifetime into retirement and (b) be rolling at least 75% of their pension fund into an ARF, so staying invested in high risk/reward assets may make sense heading towards and even in retirement.
 
mikerd4 said:
I know Im trying to guess the markets and world economics but I was thinking short term it might be a better bet to ease any potential craziness
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Can you tell me when you are going to get back into the market? You know someone doesn't ring a bell when it hits the bottom? It is likely to go up and back down again. But the biggest bounce will be at the start but you won't be in the market because you want to be sure that it is a recovery.

Downturns are a part of investing. You can't just have upside. If there was, there would be no investment risk and therefore no return. Trying to time the market is a near on impossible thing to do consistently. You may get lucky. You may not. But that is all it will be, luck. Not the greatest investment strategy to have.

I would look to the advice of Warren Buffett rather than Michael Burry.


Steven
www.bluewaterfp.ie
 
mikerd4 said:
What are the pro's and cons of putting my current pension pot into a cash fund?
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Currently you own a tiny % of global equities. The value goes up and down but your % stays the same.

If you put it in cash you no longer own that same tiny % anymore.

The only thing certain about your proposed strategy is that you'll pay fees on the way back out and way back in again. You can't time the market at the microscopic retail level. Just stay in all equities and ignore news about the market. It's mainly noise generated by people who profit from trading.
 
I agree with the last five posts. Just adding mine to reinforce the point. It's a fairly easy decision to switch to cash or low-risk funds when things are uncertain. Who knows? You might even avoid a bit of a drop in the markets. Or you might not. The much harder decision is when to switch back into an equity fund. Often, a recovery can be very swift. Miss the recovery and you've done your fund value a lot of long-term damage. At 44, stay where you are think of any fund drops as opportunities to buy at a lower price.

Google "timing the markets" for any number of articles on this subject with evidence.

Regards,

Liam
www.FergA.com
 
Cheers for the advice. A few I know are doing it but wanted to do some of my own research. The theory being moving the pot into cash for a few months to protect the lump sum already accrued from any major change. Whilst keeping future contributions going into the high risk fund.
My pension scheme has zero fees or charges for moving between funds and I can choose how much of the pot I want to put into each fund it doesn't need to be the whole amount.
 
Ok, so what will be the catalyst foe moving out of Cash in "few months".......the market haven risen (so you miss the bounce)?
Trying to time the market is a fools strategy, particularly if you have a 20 year plus time horizon.
 
I wouldn't be trying to time the market more looking to protect the lump sum that I have in the pot already so it doesn't take too big a hit over the next 6 to 12 months.
Like I said a few have already done this but I would rather do some research than a knee jerk reaction
 
mikerd4 said:
Like I said a few have already done this but I would rather do some research than a knee jerk reaction
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Folks try to time the market all the time - that doesn’t make it a good idea.

Far more money has been lost by investors trying to anticipate corrections than in all corrections combined.
 
Is there nothing to be said for moving to cash in a time of impending recession, at least for a few months.

In terms of when to move back out of cash is it not just simply a case of watching the news and as soon as it starts to look like the recession might end then move back.

Even if the recession doesnt end you will have sheltered yourself from some drop for those few months.

And if it does then youve only gone and timed the market.

You would still be lobbing pension contribution each month into your fund for those months youre in cash.

Worst case scenario, a very sharp recovery suddenly happens and you dont have time to react. But if youre studying the economy, news, markets then youre mitigating this risk to an extent.

I know most of you will say this is a terrible strategy but im yet to be fully convinced that its without any merit at all, if done right. Surely, if done right you stand to save a fortune?

If you lay out each risk, associated with this strategy, one by one. And assign a mitigant to each one....not saying itll be foolproof. Am saying it might have merit.
 
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jim said:
IWorst case scenario, a very sharp recovery suddenly happens and you dont have time to react. But if youre studying the economy, news, markets then youre mitigating this risk to an extent.
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What makes you think that professional money managers don’t watch the news?

Trust me, if it’s in the press, it’s already in the price.
 
Nobody rings a bell when markets are going down, neither does anyone ring a bell when markets start to go up. If you go back to the market crash in 2008, the biggest drawdown into Cash by investors was circa February/March 2009, and markets started to recover from March 2009. So many investors suffered all the losses on the way down, but missed the recovery. Had they stayed invested, they would have recovered their 2008 losses in the following 18 months.
So as I said earlier, what would be the catalyst for re-entering the market? How long would the recovery have to be to convince the investor to re-invest? If it’s 6 months of recovery, then it means that the investor has lost that recovery period whilst waiting to see that it’s not a “dead cat bounce”.
 
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