Pension fund units

D

dfordog

Registered User
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7
I have been paying monthly into a pension fund since 2012. The fund has not performed well so i have been buying units at a relatively low price.

In the last two months the fund has finally started making some gains.

I am trying to understand if it has been beneficial to buy units at a low price and maximise the overall number of units.

Does having more units have a multiplying effect on the overall fund value when the fund starts to perform?

Would it be a bad idea to now transfer into a fund that has been performing well and at an all time high in terms of unit price?

Apologies for all the questions but it is difficult to get my head around it.
 
Buying low is good, buying high is not. Buying lots of cheap units of a decent fund in very good. That's why it was crucial to keep paying into your pension during the 2008-2012 when units of good funds were "on sale".
This is often confusing as you have seen, it is well explained by the following article
 
Thanks Boyd
The fund i am paying into is GARS. Although i have been paying in since 2012, for some reason my online pension account says that the fund was launched in June 2019. I asked my fund manager what units were in at the start of June vs the end. It was something live 5,000 Vs 60,000. So some kind of correction factor was applied. Why would they do this?
 
Boyd said:
Buying low is good, buying high is not.
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Unless it is something that is going to stay low. When Buffett is talking about buying low, he's talking about buying the S&P 500.

GARS isn't a good fund and it's an expensive one at that. I don't have any clients in it as there are lots of other, better funds available on the Standard Life platform.


Steven
www.bluewaterfp.ie
 
Of course, buying low is a good idea. The problem is knowing when the price is low, and will it go lower or higher than the price you paid.
The Tokyo Stock market was higher than it is now, in 1989. Yep 31 years ago. So don't believe those who tell you that markets will always go up and always recover over time.

It's a good idea to invest in a diversified fund, rather than buying individual shares or investing in a fund which is targeted at a specific market. These funds can protect you by allocating chunks of your savings to secure bonds or cash funds.

Maybe take Steven's advice and look to rebalance your investment into a cheaper and more suitable fund.

Most of us have a few quid to put away, we like to see it grow a little, we don't have the expertise to make decisions on individual industries or investment types, so investing in a diversified fund is the best option.

Don't be afraid to ring up the investment company who are taking your money. You have, probably, paid them a considerable sum of money over the last few years and the least they can do is advise you properly.
 
RedOnion said:
Forget about units. You're invested in something called an 'absolute return fund'. There's a thread worth reading, with links to other articles: https://www.askaboutmoney.com/threads/understanding-absolute-return-funds.206148/
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Post #8 in the thread to which you refer contains a link to an article on absolute return funds by Rory Gillen. I'm rather surprised this article has not received more attention. In it Mr Gillen explains why he is no longer recommending hedge or absolute return funds as part of balanced or multi-asset portfolios. This should be mandatory reading for anyone thinking of investing in absolute return strategies.
 
Allpartied said:
Don't be afraid to ring up the investment company who are taking your money. You have, probably, paid them a considerable sum of money over the last few years and the least they can do is advise you properly.
Click to expand...

Standard Life won't give any advice, it's not their job. They do the administration and investment of the pension. Standard Life don't have a direct sales team either so the OP must have used a financial advisor to set up their pension. If they phoned Standard Life they will be told to get in touch with their advisor.


Steven
www.bluewaterfp.ie
 
The OP should not be discouraged, in reality for the first 5-10 years of a pension what's most important is the money you contribute not the fund performance.

Further in it's the opposite way around, your fund should be big enough that fund fluctuations dominate over your contributions.
 
SBarrett said:
Unless it is something that is going to stay low. When Buffett is talking about buying low, he's talking about buying the S&P 500.

GARS isn't a good fund and it's an expensive one at that. I don't have any clients in it as there are lots of other, better funds available on the Standard Life platform.


Steven
www.bluewaterfp.ie
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Agreed, but it was only after I said that that the OP said it was GARs.
 
RedOnion, you say above "Forget about the units". This brings me back to my original question. I am struggling to understand why the number of units in a fund dosen't matter. Consider these two scenarios,

1) After investing in a fund while it is performing i have 100 units. Unit price today is 10eur. The fund rises by 25% i will have 1250eur.
2) After investing in a fund while it is not performing i have 200 units. Unit price today is 10eur. The fund rises by 25% i will have 2500eur.
 
dfordog said:
1) After investing in a fund while it is performing i have 100 units. Unit price today is 10eur. The fund rises by 25% i will have 1250eur.
2) After investing in a fund while it is not performing i have 200 units. Unit price today is 10eur. The fund rises by 25% i will have 2500eur.
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In 1 you've invested 1,000 (100*10)
In 2 you've invested 2,000 (200*10).

You're invested in a poor performing fund. Have you heard the expression that you shouldn't throw good money after bad?

You seem to be under the illusion that this fund is somehow going to suddenly catch up with rest of the market?
 
dfordog said:
RedOnion, you say above "Forget about the units". This brings me back to my original question. I am struggling to understand why the number of units in a fund dosen't matter. Consider these two scenarios,

1) After investing in a fund while it is performing i have 100 units. Unit price today is 10eur. The fund rises by 25% i will have 1250eur.
2) After investing in a fund while it is not performing i have 200 units. Unit price today is 10eur. The fund rises by 25% i will have 2500eur.
Click to expand...

Units are a mechanism in a collective investment vehicle (i.e. a fund) to equitably treat new investments or exiting money. It is purely a statement of value per share.

If a fund performs by 25%, the value of your holding goes up 25% irrespective of unit price you originally bought at. But as you don't invest everything in one go, the unit price allows for the fact you invest over time and you therefore get the relative performance. For example, if your first month you invest at 100. Then next month you invest at 110. If the following month the price is 120, your overall value of pool will have increased 15% (20% on first amount and 10% on second)

Focus on the total value.
 
RedOnion said:
In 1 you've invested 1,000 (100*10)
In 2 you've invested 2,000 (200*10).

You're invested in a poor performing fund. Have you heard the expression that you shouldn't throw good money after bad?

You seem to be under the illusion that this fund is somehow going to suddenly catch up with rest of the market?
Click to expand...

Exactly. If this wasn't true, I'd only invest in penny stocks because eventually they'd catch up to the value of Apple stock. And I'd be the one laughing at all the people who bought Apple at $308 while I bought Grape stock at $0.01 :D

Steven
www.bluewaterfp.ie
 
SBarrett said:
Standard Life won't give any advice, it's not their job. They do the administration and investment of the pension. Standard Life don't have a direct sales team either so the OP must have used a financial advisor to set up their pension. If they phoned Standard Life they will be told to get in touch with their advisor.


Steven
www.bluewaterfp.ie
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I didn't realise that, apologies. But the same principal applies, if that broker was paid a fee. Setting up a pension should include occasional reviews and realignment of investment, instead of banking the fee and disappearing.
 
EmmDee said:
Units are a mechanism in a collective investment vehicle (i.e. a fund) to equitably treat new investments or exiting money. It is purely a statement of value per share.
Click to expand...

Correct. But only for a typical long-only fund. If, as the OP says, he is invested in a hedge fund he is buying into whatever assets the fund holds at that point in time for the purposes of its then investment strategies. If the strategy is now longer being followed the asset is ditched. For example, GARS says: “. The fund uses a combination of traditional assets (such as equities and bonds) and investment strategies based on advanced derivative techniques, resulting in a highly diversified portfolio. The fund can take long and short positions in markets, securities and groups of securities through derivative contracts.”.

So Red Onion's point in post #4 of forgetting units is somewhat valid. You're not investing in market risk, i.e. investing in equities to hold for the long term. It's more in the ability of the investment team to use the assets they hold to implement successfully investment strategies using 'advanced derivative techniques' and 'long / short' positions, etc.

RedOnion said:
You need to review what's the right investment for your pension, which might involve switching funds or provider.
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I think it would be prudent for the OP to follow this advice.
 
PMU said:
Correct. But only for a typical long-only fund. If, as the OP says, he is invested in a hedge fund he is buying into whatever assets the fund holds at that point in time for the purposes of its then investment strategies. If the strategy is now longer being followed the asset is ditched. For example, GARS says: “. The fund uses a combination of traditional assets (such as equities and bonds) and investment strategies based on advanced derivative techniques, resulting in a highly diversified portfolio. The fund can take long and short positions in markets, securities and groups of securities through derivative contracts.”.
Click to expand...

It's true irrespective of the fund's assets. The Net Asset Value (NAV i.e. the unit price) is calculated at each dealing point including all assets types. If the fund divests of an asset between dealing points, the NAV at the next point will reflect the new total of net assets.

As a unit holder, you have no direct stake in any specific asset - it is a colective scheme. The fund itself is the legal owner. You buy or sell shares at a price drivn by the net asset values. Whether the fund changes strategy, invests in different asset classes or is "long vs short" doesn't impact that
 
My other half had invested in Gars, was done through Cornmarket as part of a wider portfolio/ After just 3 years and with some advice from the good people on here + Cornmarket she changed from Gars into something else and 18 months on it has been showing an improvement. Saying that, it's nothing special but at least it stopped the haemorrhaging of Capital and am thankful for that. I know some will say that C/market are expensive to deal with, etc, etc, but they're good at their job and peace of mind is difficult to put a value/price on.
 
PMU said:
So Red Onion's point in post #4 of forgetting units is somewhat valid
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My point has been somewhat misunderstood (entirely my fault for explaining badly), but @EmmDee has corrected the fund unit piece.

My pension is invested 100% in global equities. If the market goes up, the value of my pension goes up, and if it goes down, so does my pension. Simple.

The GARS fund is invested in a series of bets. For example the CAD/JPY FX rate, INR/KRW FX rate. And relative value bets, like small cap Vs large cap. As an example, if anyone heard about the inverted yield curve in US last year, they might have thought 'so what?'. If they were invested in GARS they lost 0.4% of their investment as the fund had bet against it. How can an advisor explain to an investor why their fund hasn't done well?

The movement of the entire stock market, either up or down, doesn't have a direct impact on the value of the fund. Technically if the entire stock market lost 20% in the morning, it might be the safest thing to be invested in.

These make great sales brochures - 'we can even make money in a falling market'. The reality is they're expensive, and have a poor performance history even in one of the longest bull markets in history. Fund managers love them - they charge big fees for doing what traders do best; making the ballsiest bets in the room with other people's money.
 
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