Moving pension fund to cash

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Firstly, you can’t “ring fence” your lump sum! If I’ve 25% of my fund in cash and 75% of it invested in equities, a 20% fall in equities will reduce the lump sum available to me.

Secondly, you’re 21 years away from retirement! You shouldn’t be concerned about protecting anything. Just stay invested 100% in global equities and go and have a beer. If a friend of yours says they’re moving to cash, just say “oh, okay” and take another sip of your beer. If it’s a really close friend, refer them to this thread.

Thirdly, as Sarenco and others have said, things like impending recessions are already baked into the price. Someone going to cash with a recession on the horizon and deploying their cash once there are green shoots will see really poor results over time.
 
jim said:
Why?
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With the exit and re-entry decisions you have to make, there is a higher likelihood on missing out on the market's best days and doing a number on the total return you could have earned by staying invested:

www.putnam.com

Staying invested even when markets are volatile can serve investors well.

History shows that some of the market's best days occur shortly after bad days.
www.putnam.com

www.cnbc.com

This chart shows why investors should never try to time the stock market

Bank of America has quantified the perils of trying to time the market.
www.cnbc.com www.cnbc.com
 
I'm 41 and have my current pension invested in 100% equities. I think you'd be making a huge mistake to cash out, even temporarily.
Yes, you might protect yourself in the short term, but as others have pointed out you could potentially miss out on huge upsides, very quickly, by doing this.
With 20+ years to retirement, like myself, I think its best to leave it as is and enjoy buying units at a lower price, if the market does temporarily fall.
 
jim said:
Why?
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Because when there’s a recession on the horizon, it’s already baked into the price, and when there are green shoots, it’s already baked into the price.

You become the person who buys high and sells low. This person:
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Hi AAAContributor,

Please just take this in the interest of debate.

Let's look at your two links.

1. In the first, the by-line......

History shows that some of the market's best days occur shortly after bad days.​

The chart then remarkably simply ignores this obvious correlation. Disingenuous.......because, I believe, deliberately misleading.

2. In the second, in fairness, the obvious correlation is included and demonstrates over the chosen period (1930 to 2020), the market return is 17,715% versus 27,213% for someone who managed to avoid the extremes both positive and negative. In simple terms, missing both positive and negative extremes pays very handsome dividends. In other words, the invariable thrown out "proof" of the merits of staying in the market does anything but prove its case.


Similarly, last night, I asked Sarenco to support another oft thrown out dictum in relation to all of this. - the one about more money being lost anticipating corrections, etc. I'd be surprised if reliable evidence-based support for this assertion exists. There is loads of evidence of poor investor behaviour in general, and after a crisis in particular, but that's a completely different saucepan of fish.

At a general level, I would argue that there are times when dialing down on one's equity exposure can provide enhanced returns over the probable excellent long-term pure market returns. I could give some examples, but no one likes after-timers........me included! Personally, it has served me well but I am unable to quantify how much of the excess return is due to good old-fashioned lady luck.
 
jasdpace@gmail. said:
At a general level, I would argue that there are times when dialing down on one's equity exposure can provide enhanced returns over the probable excellent long-term pure market returns. I could give some examples, but no one likes after-timers........
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I'd be delighted to evaluate your calls ahead of time. You could set up your own thread?
 
Thanks Itchy,

That's the type of evidence-based contribution that really undermines my factual observations. Can we deal with facts and not silly cheap shots please?
 
jasdpace@gmail. said:
Thanks Itchy,

That's the type of evidence-based contribution that really undermines my factual observations. Can we deal with facts and not silly cheap shots please?
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It's neither silly nor a cheap shot, is it or is it not factual to say that you personally adjust your equity exposure in order to "provide enhanced returns over the probable excellent long-term pure market returns" and that "it has served [you] well"?

The only point that I can discern from your post is that you have reasoned that because it is theoretically possible to achieve outsized returns by adjusting equity exposure, you think it is practically possible. You cite your own skills as evidence, without knowing your performance attribution no less. It must be very good?

Chasing return with your pension fund is dangerous and expensive. Have you got practical advice for the OP that's going to beat staying invested in the market for the next 20 years or not?
 
mikerd4 said:
I wouldn't be trying to time the market more looking to protect the lump sum that I have in the pot already so it doesn't take too big a hit over the next 6 to 12 months.
Like I said a few have already done this but I would rather do some research than a knee jerk reaction
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That is exactly what you are doing. Moving into cash when markets are volatile, back into equities when things are better.

jim said:
I know most of you will say this is a terrible strategy but im yet to be fully convinced that its without any merit at all, if done right. Surely, if done right you stand to save a fortune?
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If it could be done right, you'd be running a multi billion hedge fund. The thing is, it is nigh on impossible to do it right.

Gordon Gekko said:
Firstly, you can’t “ring fence” your lump sum! If I’ve 25% of my fund in cash and 75% of it invested in equities, a 20% fall in equities will reduce the lump sum available to me.
Click to expand...
He's talking about the sum he's already accumulated.

But one of Irish Life's investment strategies for one of their group pension funds does exactly that. It was marketed around the industry years ago and never made sense. Irish Life have decided to stick with it. Nothing more than a marketing ploy and a dangerous one at that.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
mikerd4 said:
I wouldn't be trying to time the market more looking to protect the lump sum that I have in the pot already so it doesn't take too big a hit over the next 6 to 12 months.
Like I said a few have already done this but I would rather do some research than a knee jerk reaction
Click to expand...
But, that's exactly what you're contemplating - timing the market - and yet you still don't seem to realise that in spite of almost every previous post pointing this, and the inherent flaws, out to you!

Edit: post crossed with @Steven Barrett's posts.
 
jasdpace@gmail. said:
Thanks Itchy,

That's the type of evidence-based contribution that really undermines my factual observations. Can we deal with facts and not silly cheap shots please?
Click to expand...
"Evidence based" and "factual" are, effectively, the same thing.
You don't seem to understand the jargon that you're using.
 
Err sorry I came here for help and advice.

I'm not out to time or play markets. Given my pot has dropped nearly 20k in the last 12 months. I wanted to ask if moving the pot into cash to stop any further drop. Obviously the better knowledge of the people in here say it isn't. If I'd done the move 6 months ago I wouldnt be down that 20k but the timing to return as some of pointed out would be critical.
 
They've a good point, but are ignoring the reality that people do this quite often. While most people will lose money doing it and are almost guaranteed to so if they make a habit of it - it will sometimes work out well.

(I've never done it and don't ever plan to)

IF you do it I think a key would be to try to stick some rules for when to re-enter. Do not trust yourself to pick a time - it will always feel like the wrong time.

For example, if the fund you exit drops by some target percentage e.g. 10% you re-enter, and also have a set date which you leave cash regardless of whether it's worked out or not.

I've seen people stick around in cash for several years trying to find the ideal time to return, but in most cases they did have one short opportunity to buy back in at a cheaper price.
 
mikerd4 said:
Err sorry I came here for help and advice.

I'm not out to time or play markets. Given my pot has dropped nearly 20k in the last 12 months. I wanted to ask if moving the pot into cash to stop any further drop. Obviously the better knowledge of the people in here say it isn't. If I'd done the move 6 months ago I wouldnt be down that 20k but the timing to return as some of pointed out would be critical.
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It may...if there is a further drop. But we don't know if there will be (probably), how much of a drop it will be or how long it will last. Then you have to get back into the market, a second timing event. It's very difficult to do. I wrote a quick article about it in April 2020. Covid should have been like shooting fish in a barrel for market timers. It wasn't that easy.

www.bluewaterfp.ie

Diary of a market timer - Bluewater Financial Planning

4 March 2020 – 287.45 All this talk about coronavirus. How serious will it actually be? 10 March 2020 – 263.25 I’m down 8.4% since last week. Will it just be a blip like the end of 2018 or something more serious? We’ve had a few of these viruses out of China before and not […]
www.bluewaterfp.ie www.bluewaterfp.ie


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Thank you for that Steven. For clarification, its what I have in the pot Id be moving, Id continue to put any contributions into the high risk fund.
 
Steven Barrett said:
It may...if there is a further drop. But we don't know if there will be (probably), how much of a drop it will be or how long it will last. Then you have to get back into the market, a second timing event. It's very difficult to do. I wrote a quick article about it in April 2020. Covid should have been like shooting fish in a barrel for market timers. It wasn't that easy.

www.bluewaterfp.ie

Diary of a market timer - Bluewater Financial Planning

4 March 2020 – 287.45 All this talk about coronavirus. How serious will it actually be? 10 March 2020 – 263.25 I’m down 8.4% since last week. Will it just be a blip like the end of 2018 or something more serious? We’ve had a few of these viruses out of China before and not […]
www.bluewaterfp.ie www.bluewaterfp.ie


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
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There were a lot of posts around that early covid period March 2020 when the market had dropped 30% in a few months. People posted about cashing out and that this was just the start of an even bigger sell off. Lo and behold the sell off stopped fast and some of the biggest recovery days happened in the next month.

Yet it must be remembered that covid was getting worse and it was non stop covid on the media for the next 2 years yet the market had put covid behind it. The biggest up day happened after Pfizer announced they had a successful vaccine, but nobody could anticipate or time that event you just had to be invested especially in the most beaten down stocks

Then people were interested in investing again but only in tech stocks or the the s&p500 again they were chasing the most loved sector and stock index. However you have to be invested in other things besides technology as the inflation and energy crisis is showing now. Technology has made very little inroads into energy and food as is now apparent
 
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More misinformation. I played Steven's market game.....for the craic. First time, I did it, I beat the market but the associated table gave the wrong info saying that the market had beaten me. So I did it again just to see whether the error is repeated and hey...........guess what, in this second try, the table says I still lost whilst the graph clearly shows I won.

My only point here is that this is more disinformation in the "hold at all costs" book of tools.

Of course, past posts on this thread are not necessarily a guide to future posts, etc. Still, I'm not expecting any acknowledgement that this is weird or what I've said is true/factual. To clarify for certain posters, I'm not saying that if I played this game again, I'd win. What I am saying is that it would be nice if this tool gave truthful results. No more. This should be a sentence which is hard to misrepresent but let's see!



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