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Selecting Investments

Investments have the potential to help you transform your retirement strategy and make your money work harder. However, they can also carry significant risks. So, whether you’re investing your pension into a Flexible-Access Drawdown or looking for opportunities to grow your savings, it’s important to select investments that are right for you.

To help you understand what this might look like, our team of independent advisers are here to review your circumstances and provide a tailored recommendation.

When investing, your capital is at risk. Past performance is not a guide to future performance.

Our approach to investments

We explore a range of portfolios from several leading providers. Each carries varying levels of risk with options to suit your needs and consists of over twenty multi-asset funds. This means you get the right level of diversification and balance to suit your objectives.

The two main management styles we explore are discretionary fund management (also known as model portfolios) and passive fund management. But what do these look like and, more importantly, could one of them help you to unlock the potential in your pension?

We’ve broken down the key facts about each style to give you a better idea of how they might impact your retirement strategy.

Discretionary Fund Management

Discretionary managed portfolios are made up of predominantly actively managed funds and could be a suitable solution for those looking for support in making sure their portfolios remain suited to their objectives without needing a hands-on approach.

With these portfolios, your portfolio manager will regularly review the markets so that they can spot trends and adjust the funds you are invested in as conditions change, in some cases, replacing funds completely. They have the know-how to make informed investment decisions on your behalf, aiming to maximise returns and manage risks.

What’s more, the active funds within your portfolio also have their own fund managers, who make the micro-decisions regarding which individual assets are included in your funds. You’ll also be able to track the progress of your fund through regular, informative updates sent from your fund manager.

So, what are the benefits and drawbacks of discretionary managed funds?

✓         Aim to outperform the benchmark, although this is not guaranteed.

✓         Frequently amended to reflect changing market conditions.

✓         Regularly balanced to maintain risk level.

X          Fees are usually higher than other funds, and an additional Discretionary Fund Management fee will apply.

Passive Fund Management

Unlike the active fund management style described above, passive fund management, sometimes known as ‘tracking’, aims to deliver a return that is in line with current market benchmarks, but at a lower cost.

To do this, fund managers replicate market indices, such as the FTSE100. This means that the value of a fund is tied to the performance of the market index being tracked.

It is important to remember, however, if the market performs poorly, your fund will too; fund managers will only make amendments to maintain the portfolios level of risk, but this isn’t guaranteed.

Passive fund management will usually involve a fund that is made up of other funds, namely Index Funds and/or Exchange-Traded Funds. Each fund has a diverse set of investment holdings, with the aim to spread out the risk across numerous assets.

So, how do passive funds compare?

✓         Low-cost investment strategy, as fund managers don't need to pick individual stocks.

✓         Low maintenance, simple investment solution.

X          Limited investment options as your fund manager can’t handpick assets.

How investing works at My Pension Expert

To make sure we can recommend an investment strategy that will meet your requirements, our team of expert independent financial advisers take an overview of your current situation, lifestyle and your retirement goals. They also consider how comfortable and able you are to take on financial risk and any values you hold that could guide your investing.

Once your adviser completes this analysis and you both agree that investments are appropriate for you, they will recommend a portfolio that falls into one of the below categories. Your adviser will explain any risks associated with your chosen portfolio to make sure that you are comfortable with your decision.

Core model portfolios

Core model portfolios are made up of a mix of different asset classes, such as bonds and commodities. This diversification reduces the impact of market volatility and helps to improve long-term performance.

The structure of each model portfolio is determined by its objectives. Portfolios typically hold an accepted risk profile – the higher the target growth of a portfolio, the more risk it carries. This means that whilst you may benefit from particularly strong returns, there is also the risk that you could experience significant losses.

Sustainable model portfolios

Are you interested in investing in a brighter future? Unlike traditional investments, sustainable investment portfolios allocate your funds to drivers of positive change; whether that's companies promoting financial inclusion or even developing cures for diseases.

There are sustainable model portfolios at a range of risk levels, so you can find one to meet your needs. What’s more, My Pension Expert contributes to a tree planting scheme on behalf of every client who invests in a sustainable portfolio, helping to combat climate change.

Smooth managed funds

Smooth managed funds aim to provide more stable returns by smoothing out short-term market fluctuations. This results in a less volatile investment, with mechanisms to protect your savings and limit risk.

However, it’s crucial to note that, like all investments, Smooth Managed Funds still carry risk. The value of an investment made into a Smooth Managed Fund can go down in value as well as up, and past performance is not a guide to future performance.

Passive funds

If your adviser believes that you are most suited to passive investment, they will recommend a cost-effective passive fund made up of various Index Funds , Exchange-Traded Funds, and occasionally cost-efficient stocks and shares.

With passive investments, the objective is to deliver the targeted returns over the medium to long terms, whilst reducing the overall costs of investing. This means that you can keep more of the returns.

Asset allocation: building a balanced portfolio

Asset allocation involves dividing your investment portfolio across different asset classes, such as shares, bonds, and cash. When building a model portfolio, professional asset managers balance the portfolio so that the risks and target performance fall within predetermined boundaries.

For example, portfolios with higher associated risk often have greater growth potential, but also greater possibility of loss. These portfolios may have a higher proportion of shares, which tend to be more volatile, whilst a lower-risk portfolio might carry a higher proportion of more stable assets, like cash and bonds.

Fund managers usually take a broad view of global markets and industries, reviewing trends before digging deeper. It’s important that portfolios are diverse, with a mixture of asset classes, industries, and global markets. This helps to reduce risk by limiting exposure to any single investment.

Understanding the benchmark

Your independent financial adviser will send you a copy of your recommended portfolio factsheets with your application pack. These outline the make-up of assets, along with the fund’s past performance against the benchmark.

It’s important to remember that past performance should not be used to predict future performance. As with all investments, growth cannot be guaranteed. However, the benchmark will show you how a portfolio compares to the average performance of other funds within the same risk profile.

The benchmark can be used to evaluate how the different asset groups which make up your portfolio have performed and when it may be appropriate to make fund changes.

Ready to get started?

Investing can be a great way to help you grow your wealth, provide a lasting source of income, and achieve a financially stable retirement. However, it’s not without risk, and it’s important to be fully informed before making any decisions.

Our team of independent advisers can help you to understand the various investment options available and how these align with your financial goals, so you can explore the options that could provide long-term stability and growth potential.

Book a call with a member of the team today.