# Should I transfer avc contributions to cash fund



## MickeyD (29 Jan 2009)

I am contributing to an avc fund for the past ten years. Like everybody else my fund took a hammering last year. Losing dramatically. It has been suggested that I transfer contributions to a cash fund. little gain but at least I won't lose and could transfer back when the market looks like recovering. Main point is I have only six years to retirement. Is this enough time to recover? and what about money already in fund, can this be transferred or is it the wise thing to do? Looking forward to your comments.


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## Dave Vanian (30 Jan 2009)

Given that you've already suffered quite a loss, transferring your existing fund to cash now only serves to lock in that loss and prevent you from participating in any recovery.  Personally I wouldn't as I believe that markets will recover in well under six years.  

If you want to play it safe, you could consider redirecting your future contributions into the cash fund.


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## MickeyD (5 Feb 2009)

Thank you for that.


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## RSMike (24 Feb 2009)

Dave Vanian said:


> Given that you've already suffered quite a loss, transferring your existing fund to cash now only serves to lock in that loss and prevent you from participating in any recovery.



Why does converting to cash now "lock in the loss", why can't MickeyD play safe now convert to cash and then convert back to equities when (if) the recovery happens?


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## Dave Vanian (24 Feb 2009)

Because nobody is going to tell him when the bottom has been reached.  By the time he decides that it's safe to switch back into the markets, the recovery may be well underway and he may miss it, or at least part of it.  It's fine if he's going to be watching markets every day, but most people don't, unless they're involved with, or interested in investing.


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## queenlex (24 Feb 2009)

RSMike said:


> Why does converting to cash now "lock in the loss", why can't MickeyD play safe now convert to cash and then convert back to equities when (if) the recovery happens?


 
Is that not one of the riskiest strategy imaginable?  I am no expert now but that sounds very risky to me.


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## RSMike (24 Feb 2009)

queenlex said:


> Is that not one of the riskiest strategy imaginable?  I am no expert now but that sounds very risky to me.


Looks very risky to me staying in equities right now, I agree you need to be watching the market closely to switch back as quickly as possible when the market really turns, (waiting for that elusive "double bottom",  ) but if there are thousands of Euro at stake why not keep a close eye? its not that difficulty in the Internet age, seems to me like right now all you need to do is listen to the radio every morning, and right now it sounds like bad news on equities every day.


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## NorthDrum (25 Feb 2009)

Generally, its difficult to give advice when you havent discussed a persons own feelings towards risk and their own specific goals.

*This is a general piece of advice intended to be taken as is stated . . It may not be relevant to all reading . . *

I think there are two connected lines of thought on investments in markets. . . 

What are your personal feelings towards risk (ie. how will media coverage affect your mood with regards to investing) . . . 

and . . . . 

Do you want to invest professionally for a quick return or long term return . . . 

Well . . . . . . Mickey D . . . . 

Have you considered what risks you are willing to take to improve your own pension performance?

What are your feelings towards risk ? Will you be reading the papers every day and watching the news saying "oh dear god, whats happening to my investment?" or will you let your investment lie and give it time to mature?

Given your near retirement age, the general consensus would be that you should stay on the side of caution. Keep cool. The reason people continue to lose money on their investments now is because either they are greedy (and ignorant), they are happy enough to let their investment recover, dont understand how their investment works or are worried about missing the upturn. At your stage (assuming you are 5 years or less from retirement) you should be only thinking about what you require at retirement, not what you can potentially make between now and retirement. There could be a recession for the next 20 years or we could see an upshot in the next 2 years, what is your future worth betting on?

Forget about what you want to have, focus on what you have, too many people are focusing on the wrong things . . Just work with what you have and make the most out of it . 

I do believe in the annoying concept of "consolidating your loses" but think in the case of people coming closer to retirememt that they should be more concerned with the maximum that they can assure themselves when they eventually finish up working (forget about lulling over what you had last year). Forget about what you could of had and focus on what you have and what you realistically wish to have . . 

Investment performance, whether it be pension or regular investment, is not dependant on what you expect, more what you have decided is an exceptable level of risk. . . It doesnt matter how well or bad your investment performs, its actually your expectation thats most important. . .

The question isnt really "What should I invest in", more " what should I invest in, given the fact that my risk profile is . . . . "

I personally believe that anybody willing to invest in anything other then Deposits should ask themselves , "what can I afford to lose" . . .

It may sound daft to the average Joe, but its something that most people dont consider when investing in anything other then Deposit funds . . .


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## RSMike (25 Feb 2009)

NorthDrum said:


> Generally, its difficult to give advice when you havent discussed a persons own feelings towards risk and their own specific goals.
> 
> *This is a general piece of advice intended to be taken as is stated . . It may not be relevant to all reading . . *
> 
> .




The first bit of financial advise I have seen in a long time that makes sense to me and I perceive to be unbiased.


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## Purple (26 Feb 2009)

Excellent post NorthDrum.


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## galwaygalway (26 Apr 2009)

hi
i am wondering if any of you have advice re continuing to pay AVC's.  i signed up with irish life and am paying the highest rate of AVC.  it has taken a hammering in value,like everyone else.  

i know that i can stop payment and resume again at a learer stage or i can reduce what i am paying now and increase again at another stage.

  i'm just confused as to what to do, on the one hand i imagine that i am buying cheap now and when the turn around comes then the value should increase...but it may be years before this happens and in the interm i will have lost money...  or maybe the biggest losses have happened, of course none of us know if we have reached the worst...  i am lucky in that at the moment i can afford to keep paying the current rate of AVC ( but when the new taxes kick in next month, it may be very different).  thanks in advance for any help given.


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## NorthDrum (27 Apr 2009)

galwaygalway said:


> hi
> i am wondering if any of you have advice re continuing to pay AVC's. i signed up with irish life and am paying the highest rate of AVC. it has taken a hammering in value,like everyone else.
> 
> i know that i can stop payment and resume again at a learer stage or i can reduce what i am paying now and increase again at another stage.
> ...


 
*Option 1:*
Cancel your monthly contributions. You dont get tax relief on contributions, your AVC will go up or down based on what value it is to date and you will have more disposable salary to do as you please with.

*Option 2:*
Continue contributing to your AVC and move your ongoing contributions to be invested in cash. By leaving your existing fund in its existing state (assume its high in equities) you are giving it the opportunity to regain some of the losses it got over the years. All future contributions should hopefully get between 2-4% returns, but at least you know that any stock crashes shouldnt affect your ongoing contributions. You are satisfied with the tax relief that you are getting, that is your main motivation for this option.

*Option 3:*

Continue Contributing to your AVC into an equity based fund. Move your existing fund into cash (*careful this is "locking in your losses"). At least you know that you are buying units in your pension cheaply (cheap if they rise of course!) and your main fund is pretty much guaranteed (certainly in cash its as guaranteed as it comes!).

Of course you can use any of these options reducing your contributions aswell.

Please read my post above with these options in mind. You have to consider your own personal feelings on investment before you can properly assess the best investment for you. Investing money is not about working out how much you can make, but about how much risk you are comfortable taking in direct relation to how much money you would like to gain.


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## DerKaiser (27 Apr 2009)

RSMike said:


> The first bit of financial advise I have seen in a long time that makes sense to me and I perceive to be unbiased.



That's very true.  Personally I believe there are a lot of people in the pensions industry (primarily on the sales side from my experience) who are giving bad advice.  More often than not they believe the advice they are giving themselves purely because they have no real understanding of how markets work.

There are contrasting beliefs out there that buying after markets have fallen is a good thing versus buying in a rising market.

Markets rise and fall for a reason.  There are no predetermined returns out there, regardless of what has happened in the past.

Someone retiring in 6 years time really needs to focus on a few key factors.
1.  Are you relying solely on your pension to live on in retirement?  If you have other assets then you can afford to take a risk, if not you have to be cautious
2.  Is it a requirement that you take out an annuity on retirement?  Self employed people can take out an ARF meaning they can leave money in equities longer term i.e. they won't be forced out of equities at retirement in the same way as PAYE workers
3.  Do you really have the stomach for risk?  Many people, even if they are not relying on their pension, just find it very hard to live with the ups and downs and probably do not need the stress or uncertainty of riskier investments


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## Joody1 (27 Apr 2009)

Pensions are very important you will need to have a very good one for your old age, if not see the clip below to what can happen in old age, it is not very good for elderly people.  I note that the HSE are going to make money available for to keep elderly people in their homes and hopefully the will not followed the UK example in conducting a Dutch Auctions on the internet when giving out contracts to bidders for the lowest price.  Look after your pensions and keep it up and let nobody take it away from you.

http://www.bbc.co.uk/programmes/b00jnknl

Hope I have not put this on the wrong thread


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## galwaygalway (27 Apr 2009)

thank you so much for your advice.  at least i know now some questions that i have to ask irish life and i can select some options. much appreciated


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## galwaygalway (27 Apr 2009)

NorthDrum 
 thank you so much for your advice. at least i know now some questions that i have to ask irish life and i can select some options. much appreciated


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## NorthDrum (28 Apr 2009)

galwaygalway said:


> NorthDrum
> thank you so much for your advice. at least i know now some questions that i have to ask irish life and i can select some options. much appreciated


 
You are very welcome mate, good luck with your pension . . .


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