Pension investments

Hi All, I'm 40, have no company pension and want to set up a private pension.
At present I can only afford to contribute €1k/ month. This may increase in the future.

I was planning to go with LA Brokers (they're linked to Zurich) and just do an even split between 4 of the high-risk funds (level 5 and 6 risk ratings) and then leave it alone.

Anything I should consider changing about my strategy?

doranalex1 said:

just do an even split between 4 of the high-risk funds (level 5 and 6 risk ratings) and then leave it alone.

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This is arguably unnecessary and doesn't improve diversification. You're 40 so can well afford to just stick it all in a low charges maybe passively managed high/all equity content index tracker and forget about it for 20+ years.

This thread might also be of interest:

The cost of being able to survive sequence of returns risk seems enormous. Either you sacrifice growth in the long term (stocks/bonds) or survive decimating your portfolio in the short term (100% equities) by having an enormous pot to begin with. Possibly a backup, diversified source is needed like property/annuity/move somewhere cheaper.

In my humble opinion a retiree should be ready to adapt their spending when the markets are low (to the extent that they can) and possibly to build on other income sources when the markets are up like building a blue chip dividend portfolio etc.

With the world on fire the way it is now there is a serious risk of disruption e.g. Overvalued US stocks, potential WW3, declining dollar, climate change etc. A couple of gold bars in the attic might be a good idea too.

ClubMan said:

stick it all in a low charges maybe passively managed high equity content index tracker

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Thanks ClubMan. I'm fairly new to all this, I'm not sure I know what these are or how to access them.
Could you give one or two examples of high equity content index trackers just to help me understand?

Re. the low charges, LA Brokers offer 0.75% AMC (no trailing fee, no contribution charge) so I thought I was doing pretty well on the charges. Should I be looking for lower than this?

Thanks for the link to the other thread. I read through it once before but so many posts I got lost in the weeds.

doranalex1 said:

Could you give one or two examples of high equity content index trackers just to help me understand?

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A very common one would be an MSCI World Index tracker fund.
Most providers have one. Either their own or (more commonly I think?) via the likes of Vanguard or BlackRock etc.
E.g.
Etc...

ClubMan said:

This is arguably unnecessary and doesn't improve diversification. You're 40 so can well afford to just stick it all in a low charges maybe passively managed high/all equity content index tracker and forget about it for 20+ years.

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Hi ClubMan, just getting back around to this now. Two questions I had:

1. Would a passively managed high/all equity content index tracker typically be expected perform/ grow at the same rate as the Zurich high-risk funds in the long term? (some of the Zurich ones I am looking at are claiming to average 10% P.A. growth)
2. LA Brokers offer 0.75% AMC. Would I expect to pay less fees than this with one of the index tracker funds you mention? Or about the same?
3. These funds are presumably still a PRSA product, for tax purposes?

Thanks in advance.

doranalex1 said:

some of the Zurich ones I am looking at are claiming to average 10% P.A. growth

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Any such claims for future returns are meaningless.

doranalex1 said:

Would a passively managed high/all equity content index tracker typically be expected perform/ grow at the same rate as the Zurich high-risk funds in the long term?

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If the asset mix is similar then the returns should be similar.

doranalex1 said:

LA Brokers offer 0.75% AMC. Would I expect to pay less fees than this with one of the index tracker funds you mention?

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I'm not sure. But maybe you should also look at Royal London Ireland.

doranalex1 said:

These funds are presumably still a PRSA product, for tax purposes?

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The ones that I mentioned above are available via a PRSA. Royal London Ireland also have a similar MSCI World Index tracker fund.

ClubMan said:

The ones that I mentioned above are available via a PRSA. Royal London Ireland also have a similar MSCI World Index tracker fund.

Our fund range - Royal London IE

It's always good to understand your investments fully, as investing does mean your money is at risk. Here you can read more about our fund range.

www.royallondon.ie

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Thanks ClubMan, appreciate the advice.

1. They're not 'claiming' to average the growt rates on the fund performance calculator, that's what they've actually done. But, it's not a guide to the future.
For illustration purposes, Date Range figures from 01/07/2015 to 25/06/2025 (because those are the 10 year dates that the most recent accurate figures are available from on both (most similar) funds - International Equity (Managed) 9.82% pa Indexed Global Equity (Passive) 9.59% pa (same AMC and all other charges included). But, you could pick another period and those differences might be reversed.
2. There are lower cost AMCs available for the level of contribution you mentioned on index tracking funds (only), @ circa 0.05% to 0.15% lower. The Global Index tracker isn't on the ZL PRSA product yet. I was hoping it would be at this stage but there's a delay. Not sure if it will be on both Standard or Non-Standard though.
3. It's the product that you claim the tax relief on, not the fund/s.



Gerard


www.execution-only.ie

Fibbernacci said:

With the world on fire the way it is now there is a serious risk of disruption e.g. Overvalued US stocks, potential WW3, declining dollar, climate change etc. A couple of gold bars in the attic might be a good idea too.

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The world isn't remotely on fire and there has never been a time in history without significant geopolitical and other risks. For perspective I started my own pension in 2005 at a time when the US had boots on the ground in two separate foreign wars, and it was also overwhelmingly obvious that Ireland and much of the rest of the world was in a grip of an economic bubble. It was still the best investment decision I ever made, by an absolute mile.

I've never understood the attractions of gold as an investment.

T McGibney said:

I've never understood the attractions of gold as an investment.

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Gold has a number of undesirable characteristics as an investment. It pays no interest, dividends or other periodic return. In fact, there's a cost to owning it, since you have to pay for secure storage somewhere, or run the risks associated with keeping it in a shoebox under the bed, so to speak. Plus, unlike land, buildings, or an interest of some kind in a business enterprise, it has no intrinsic productive capacity, so you're entirely dependent on market sentiment to determine the price of gold. This makes gold quite volatile, in real terms. There is no fundamental reason why the price of gold should tend to rise faster than prices generally.

It does have some positive characteristics. It's highly liquid. It's a traditional safe haven in times of instability so, when the economy is taking a dive or threatening to, gold often appreciates in value. Therefore, it's an investment you might favour if you are a pessimist, and expect the economy to tank. But most of the time the economy grows, so most of the time gold is fairly sluggish as an investment, compared to real assets like property and shares.

If you can foresee the near future and jump into gold just before instability threatens and out again just before things stabilise again, your gold investments will probably do nicely. If you're a buy-and-hold investor, not so much. Over most medium and long-term periods, a diversified holding in equities or property has outperformed gold.

GSheehy said:

1. They're not 'claiming' to average the growt rates on the fund performance calculator, that's what they've actually done. But, it's not a guide to the future.

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I misread it as the 10% being a projected annual return. But the point still stands that it's largely irrelevant.

TomEdison said:

There is no fundamental reason why the price of gold should tend to rise faster than prices generally.

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Gold is up 44% in the past year due to the fundamental reason that central banks having been buying it and offloading their US Dollar reserves. This trend is likely to continue for the short and medium term given the growth in the US fiscal deficit and probable return to money printing further devaluing the dollar. Once retail investors get involved in this early stage gold bull market the price will likely rise more rapidly.

TomEdison said:

Over most medium and long-term periods, a diversified holding in equities or property has outperformed gold.

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I think the hindsight interest in Gold is coming from the fact that over the last 10 years, if you compare the performance of a Gold Fund and a Global Index Tracker on a like-for-like basis then they're almost identical, with a Property Fund lagging about 130% behind.

Flybytheseat said:

Once retail investors get involved in this early stage gold bull market the price will likely rise more rapidly.

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I doubt that bit. The volume of money representing retail investors trying to buy into a rising gold price will be trivial compared to the volume of money represented by central banks and institutional investors reducing their USD exposure and buying gold instead. It's not going to have a significant impact on price, and certainly won't accelerate price rises caused by the central bank/institutional money.

(Of course, since the price of gold is conventionally quoted in USD, a decline in USD will make gold look like its appreciating in value anyway. An potential investor outside the US contemplating buying gold needs to correct for that before making his decision.)

TomEdison said:

It's highly liquid.

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Well, highly malleable anyway

GSheehy said:

, if you compare the performance of a Gold Fund

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I would expect a gold fund to perform better than direct gold investments as it will likely include shares in mining companies and other gold related indistries.

See example used here

Fortune said:

I would expect a gold fund to perform better than direct gold investments as it will likely include shares in mining companies and other gold related indistries.

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I wouldn't assume that a "gold fund" will "likely" do this. My expectation is that a gold fund would invest in gold, but if you want to know for sure there's no alternative to reading the prospectus for the fund in question.

If it does invest in mining shares, etc, it wouldn't follow that it will outperform a straight gold fund. Mining shares are highly volatile — they are affected not only by the prices of the commodities that they mine, but also by the success, or lack of success, of their prospecting and exploration activities. And of course not many quoted mining companies mine only gold, so for the most part buying mining shares gives you only an indirect and dilute exposure to the price of gold.

Seems very odd to me that a thread about pension investments has descended into one about the minutiae of gold based investments... Maybe some people think that there's a place for some level of gold in a pension investment portfolio but, almost certainly, it should only be a minor/marginal component. Personally I wouldn't and don't bother with it at all.