#PensionRisk #InvestingStrategy #RetirementPlanning
Hey everyone, I’m in my early 40s and have about 150k in my HSBC pension. 🎉 I’m planning to keep contributing until I retire in about 25-30 years – my mortgage will be paid off before then and I don’t have any kids. 💸
Currently, the risk level of my portfolio is medium, but I’m thinking of making it a bit riskier since I have plenty of time left to invest. 📈
I’m curious – what’s your age, pot (pension pot), and risk level? Do you think it’s a good idea to increase risk as you have more time to invest?
Here are some things to consider:
– Your current financial situation and future plans
– Short-term and long-term goals
– Market conditions and economic outlook
Let’s discuss and share our thoughts on finding the right level of pension risk appetite! 🤔💡
Move it to high risk.
What does medium risk mean to you? Do you know what your pension is invested in?
Asset allocation is far more important than arbitrary risk profiles.
Is this the HSBC staff DC pension plan ? Whilst the funds have zero cost they are very conservative. So definitely go for the Global 100% equity one.
The days of reducing risk as you approach retirement as you had to take an annuity are gone.
Do you have any defined benefit pension scheme at all ? Having a DB scheme allows you to be more adventurous with the DC pot.
Are you on schedule to have qualified for a full new state pension by your target retirement date ?
People mis-understand risk, in this context. What it really means is variability. A high risk fund has high variability. That means that, over a short term there is a chance of a significant loss but also a chance of significant gain.
A low risk fund does not mean there is no chance of loss (anyone holding a bond fund in 2022 will have found that out) but you’re less likely to see a >30% loss or a >30% gain.
When it comes to variability, the important factor is time. The longer you have to invest the more likely the upside will counter the down side. Broadly speaking, the longer you have to invest, the higher the variability you can handle.
I strongly believe that most people should be investing pensions in high risk funds, as the real risk is that their pension fails to grow enough to cover their retirement needs.
Consider also portfolio diversity risks too. You can mitigate a lot of diversity risks with a global index. I’d argue that a 100% equities global index would carry less risk than a 60/40 fund with single stocks or an undiversified portfolio.
I’m 54 and 100% in equities. During COVID I was 200k down, now I’m 200k up. If you’re not happy with those types of swings, then go lower risk. 😁
No-one else can tell you what risk level is right for you. Risk levels of “low”, “medium” and “high” aren’t meaningful anyway – what do those even mean, in terms of percentage losses or how long the fund will take to recover from a stockmarket crash? But you shouldn’t be getting reassurance from other people telling you what they’re invested in, because their risk tolerance isn’t yours.
Watch Lars Kroijer’s [short video series](https://www.youtube.com/playlist?list=PLXy71rkGuCjXLg9N8zowwUpXCYfBcMJFK) and read his book or Tim Hale’s [*Smarter Investing*](https://www.amazon.co.uk/dp/1292444401).