The right mix for pension choices?

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onekeano

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Hello, I was listening to a pension expert on Morning Ireland this morning on the outlook for 2010. A lot of the usual stuff "need to have a balanced portfolio..... equities can't repeat the performance of 2009 but will have more modest growth". He emphasised that people need to look at their portfolios more regularly as the environment these days is more volatile which can't be disputed.

On arrival at work I checked my own online as the mix is as follows:
Euro Govt Bond index = 25%
Cash Fund = 40%
World Equity = 2%
European Equity = 8%
Japan Equity = 4%
Pacific Basic Equity = 6%
Default Fund = 10%
North American Fund = 4%
UK Equity Fund = 2%

In 2009 I had much more equity weighting but at the end of the year decided to move more towards cash & bonds (fear of the old double dip!!).

As I approach 50 the fund is worth c. €250k an would be interested to get some views as to the above mix, eg. should I have more in bonds? should I move more into Asian equities.......

I know there is no right and no wrong answer but would appreciate any views....

Thanks
Roy
 
onekeano'
Looking at your fund mix it seems to be split:

  • Cash 40%
  • Equities 25%
  • Bonds 25%
  • Default 10% (not clear what this is in)
You are correct in saying that there is no "right answer". The influencing factors I suggest should be:

  • What other assets you have?
  • How they are invested?
  • When you plan to retire (the investment term to go)?
  • Your personal attitude to risk (can you live with volatility)
  • What will you do with the Fund at retirement (buy an annuity or invest in an ARF)?
In my opinion (its just my opinion) your mix is fairly conservative . In the short term, Cash will deliver very modest returns. Equally Govt Bonds. Equities are likely to be volatile over the coming 12 months or so (is the global economy recovering, is it a V shaped or a W shaped recovery, are corporate profits likely to rebound, is inflation on the horizon etc) but should beat Cash. Assuming you have some 15 years to retirement, I would suggest that you could reduce the Cash holding and increase the Equity weighting for the next few years (perhaps more Emerging Markets). also you could look at reducing the Govt Bond weigh in favour of Corporate Bonds.
As you get to within say 7 years of retirement you could then seek to move towards a more conservative mix.

Hope this is food for thought.

Conan
 
Hi Conan, first of all thank you very much for taking the time with such a considered response. What you say about cash and govt bonds makes complete sense and I think I will reduce my positions in both there funds and diversify into more Aisan markets for the time being.

What other assets you have? have an interest in a couple of properties which were bought pre 2000 and are still do doing well worth say same as my pension.
How they are invested? See above
When you plan to retire (the investment term to go)? ideally 60 but who knows these days :)
Your personal attitude to risk (can you live with volatility) Yes
What will you do with the Fund at retirement (buy an annuity or invest in an ARF)? Hadn't actually thought of this, just assumed annuity... would an ARF be better?

Conan (or others) and views welcomed......

Thanks
Roy
 
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