This week marks the 50th anniversary of the moon landings. An incredible feat for 1969 given their very limited computing capability.
Investing itself has seen some massive changes since those days of pen & paper and men shouting “buy and sell” on the stock market floor.
Today we have far more sophisticated tools at our disposal that can provide up to the minute insight and trading which can be executed in a fraction of a second. Such advancements have provided us with huge advantages versus 50 years ago.
However, it seems not everyone is learning the lessons of the past and sticking to the fundamentals of good investment practice. And keeping to a tried and tested formula is never more relevant than when it comes to investing your pension pot. Here are three ways to ensure your retirement money is being invested wisely.
The market knows best
There are some things you need to accept. Not letting human emotion get in the way is one – as sadly so often happens with many fund managers – they let their egos get the better of them and think they can outwit the market by picking out stocks. Very few succeed. A case in point is the recent Woodford Fund scandal which lost billions of investors’ money.
‘Active’ investing rarely works and can also be expensive to execute. ‘Passive’ investing – or market trackers often outperform active funds as decisions are based on data not emotion or gut feeling, as well as costing a lot less to manage.
Invest for the long term
Another thing to accept is market volatility. Good investors deal with volatility and instead of running for the exits during downturns they stay with it and profit from any future up-turns. As any good investor worth their salt will tell you it’s about ‘time in the market’ – not ‘timing the market’ that matters.
Jumping in and out of the market can lead to missed opportunities as over the past twenty years, the UK stock market has returned 13.9% per annum (before fees), proving that despite falls in the market, which will inevitably happen, over time growth returns.
Keep control of costs
Very few people know it but keeping costs as low as possible is the best way of getting the best investment returns. It’s quite simple really – if the market grows at a rate of 7% per annum and fees are 4% per annum – that’s just 3% for your pension portfolio.
Furthermore, less of your money is being re-invested – known as compounding – so your pot grows at a slower rate and, depending on the fees being charged, sometimes not at all!
The world of investment management is by no means a piece of cake but there are certain investing principles that will stand any investor in good stead – if they can stick to them.
One small step
If you’d like to know how your pension is performing and if it’s sticking to these vital principles then please get in touch and we’ll provide a full review free of charge.
