We’re shut at home, in some cases juggling (badly) home-schooling and home-working, and worrying about whether we’ll have jobs to go back to. At the same time, the value of many people’s pension plans and Individual Savings Accounts (ISAs) has fallen in line with broader global markets. Although now isn’t the best time to start changing where you’re invested, as this could lock in losses, you might want to consider if your current investments are the best option for your longer term goals. Here are some key things to think about.
Have a good mix of investments
It’s arguably not as exciting as finding the next super-charged technology stock, or dabbling with a ‘can’t fail scheme’ but when it comes to investing, boring is good! Having a blend of investments can help cushion your savings from the worst of market ups and downs during difficult times. That means including both bond and stock market (equity) investments, while also investing across a variety of countries.
Know your limits!
Think about matching your investments to your age and appetite for risk. Put simply, there’s no point in having all your money in higher risk stock market investments, if you only have a couple of years to retirement, or if you’re an inherently nervous person who’s spooked by market volatility. On the flip side, if you’re still a long way from retirement, having all your money in lower risk investments may mean that it doesn’t grow enough to meet your future retirement goals.
So consider your timeframe and how long you have to recover from any market volatility. And if you want some help understanding how much risk you’re comfortable taking, Standard Life has a risk questionnaire that can help you with this.
Consider bringing in an expert
There are plenty of investment options available where someone else does the hard work for you – ‘hands-free’ options.
For example there are funds, often called ‘multi-asset’ funds, where a fund manager picks a blend of investments and can make changes to this blend if the market environment changes.
There are also multi-asset funds that let you choose an option based on how much risk you’re comfortable taking. The fund managers will use different types of investments to try to achieve the best possible returns for the level of risk you’ve chosen. Multi-asset funds are a good way for less confident investors to make sure they get a decent mix of investments, and are not putting all their eggs into one basket.
If you’re invested through a pension plan, there are options called ‘lifestyle profiles’, which automatically move your money into lower risk investments as you get closer to retirement. These also make sure that your money is in the right investments for how you plan to use your pension savings in the future.
Lastly, try not to panic
These are tough times. Markets are digesting a major economic shock and it may take quite a long time for them to find their feet again. However, markets have had these wobbles throughout history and have recovered. Have a look at the article Market crashes – what can we learn from history?, for more on this. The key is not to watch the ebb and flow of your investments, but to hold your nerve and keep investing.
If you’re investing for the long term, as you will be if you’re investing through a pension plan, you should think twice before selling your investments just because markets are hitting the headlines. You can read more in the article I’m worried about the current situation – should I sell my investments?
We always think it’s a sensible idea to try and ‘drip feed’ investing as much as possible. This is because you’re smoothing out the price at which you’re buying investments over time, so you’ll never invest everything at the very worst time. If you have a pension plan, it’s likely that you’re doing this already, with monthly payments from you, and your employer if you have a workplace pension.
Want more information?
For further guidance and support about how the impact of coronavirus might affect your pension plan or investments visit the Pensions Advisory Service website.
The information in this article should not be regarded as financial advice. Please remember that the value of investments can go down as well as up and may be worth less than was paid in. Past performance is not a guide to future performance.
All information is based on Boring Money’s understanding in April 2020.