Hi Gary,

30% in Bonds with the remiander split between UK and Global Equities would actually provide an asset allocation similar to many 'Balanced Equity funds' so will hopefully still provide a solid foundation for long term growth with slightly less volatility than a pure equity portfolio.

Personally, I'm a balls-out investor within my pensions as I've got just under 30 years to go. God, that's depressed me! I slit it between Global and Emerging Equities with some Commodities and have done pretty well despite most of it heading southwards at some point or other. Not fot the faint hearted!

Anyway, best of luck.

Thanks for taking the time to reply, your points are quite valid in my view.

I have given this some further thought since my previous post and I think that the best thing for me to do; is as you suggest, diversify the risk a bit. My Company pension choices are fairly limited - pretty much Equities, Bonds or Cash in what ever percentage split you want. Long term investment in Equities seems the correct choice for me as I have 20 years until retirement (at least :-( ), but it seems wise to diversify this risk a little bit by switching a small proportion (perhaps 30%) across to Bonds to give me some options.

Rgds

Gary

This is the age old question of risk versus return. Everyone wants high returns without taking any risk, but unfortunately this is just not how investments work.

Your company pension fund trustees should be able to direct you to their financial advisor who can run through a risk profile exercise to determine your tolerance to risk, this will drive the asset allocation that you should look to achieve through spreading your pension across various asset classes (property, cash, equities and fixed interest being the main classes).

It is impossible to guess which asset classes are going to perform better than others and the best route is to diversify so you don't place all of your eggs into one basket. Many investors behave in the most counter-productive way possible by selling once they have seen a loss and then waiting for the prices to rise before re-investing; in no other aspect of their lives would they behave in such a way. For instance, before making a major purchase for the home would we not wait until the sales, where prices drop, before looking to buy? I know I certainly do. You will be purchasing your units in your UK equity fund from your monthly contributions at a 10% discount compared to last year so as and when things improve, would this not actually good news? Perhaps.

As you still have a long way to retirement you can afford to be more adventurous than someone close to retirement, but only you will know how much risk you are prepared to take. Don't forget that investing in a UK FTSE tracker fund is practically a global investment with a UK outlook anyway; have a look at the companies in the FTSE and see how much of their turnover is derived solely from their UK activities.

The Eurozone 'crisis' is vastly overhyped by the media. It is a liquidity problem and not the end of the world as we have been led to believe. Overall, the Eurozone is predicted to grow by around 3-4% in 2012; not the Armageddon some have been predicting. The main problem is that stock market valuations are based as much on speculation and sentiment as they are on physical balance sheets; when investors get jumpy the markets hop around all over the place, as we have seen. Greece will probably end up leaving the Euro zone and some French banks will get hit hard by the default, but as most of this is old news I would be surprised if any fund managers had exposure to any of this in their European funds.

Emerging markets growth is to slow as they tend to manufacture goods bought by the belt tightening western economies but are still going to provide better growth potential than the UK for instance.

Each and every investment opportunity carries a risk, and unless you are willing to pay for advice, you should diversify as far as possible by having some bonds (which are loans to companies like Woolworths so are not totally safe either) and equities.

Hope I've not confused you too much and feel free to fire back at anything you would like clarification on.

Thanks for taking the time to respond, it is about 20 years until I retire so I agree that the pension should normally be invested in Equities for mid to long term growth...but these are not normal times.

Last year the Equity Fund did very well and grew by about 25%, but this year to date it is down 10% in 5 months! Whereas the Bond fund seems to have made about 9% in the last year and has made 5% over the last three years.

I am convinced that there will be a Eurozone Government or Bank disaster in the New Year and this presumably will cause a significant drop in Equities all around the world - I wondered if there is something that I can do to shelter from this for a year or so by changing my investment decision.

It seems to me that a safer option would be to change to UK Bonds and accept the minimal returns but reduced risk, but the only Bond Fund available in my scheme invests in both UK and Foreign Bonds both government and business so this Fund could be even riskier than Equities in the event of a Eurozone banking collapse as you would presume that it invests in Eurozone Government and Business Bonds.

I am not sure that the Cash Fund is a good idea with inflation at 5% either - so I guess that I am back with sticking with the Equities or perhaps spreading across both the Equities and Bonds Funds.

Does this make sense?

Rgds

Gary

If you particularly want to reduce currency risk, you should switch to UK equities. If you want to avoid all risk, switch to cash or UK bonds.

It is likely that fund managers will take some steps to avoid obvious risks (they should by now have moved out of any investments in small european banks, Greek bonds, etc.) but there is nothing wrong with taking steps to address any particular concerns that you may have.

If you are retiring shortly, it is likely that you will want less risk in your portfolio although moving to cash or bonds may limit your return to a couple of percent each year. Often the footse index will change by a couple of percent in a day. If it's a while until you retire, you are probably best keeping most of your investment in equities.

Our company pension scheme allows us to self select from a range of funds covering Global & UK equities, bonds and cash:

L&G Global Equity Fixed Weights (30:70) Index Fund

L&G Overseas Equity Index Fund

L&G UK Equity Index Fund

L&G Pre Retirement (Bond) Fund

L&G Cash Fund

My pension is currently allocated 100% to "L&G Global Equity Fixed Weights (30:70) Index Fund" but I feel sure that the Eurozone Crisis is only going to get worse in the New Year - possibly catastrophically.

Is there anything that I can do to protect my pension - would moving it across to Bonds or Cash be safer than leaving it in Equities or will all forms of pension be equally at risk of a recession/depression?

Any advice gladly received

Gary