informed decisions blog

A Public Service Announcement for Soon-To-Be-Retirees! Blog 207

3rd October 2022

Paddy Delaney

Informed Decisions

If you are a soon-to-be-retiree or an already-retiree, you may well be grasped with fear in times like these. While not wanting to sound grandiose, this week’s piece is less of a Blog and more of a Public Service Announcement.

The ‘markets’ are in turmoil. Combined with constant media negativity, can compound. The result is that some people who were previously calm and steady during blips may be starting to fidget. They may be starting to wonder if this really could be massively disruptive to their plans.

If you are in that camp, think of this ultra-short piece as a tiny elixir to the incessant investment bloodbath of mainstream media.

My main message; We knew this was coming, and we know it will end.

In three short parts, I will outline where we are in the greater scheme of things. And in each case, I will assume that your pensions or personal investments are invested in compliance with the following key aspects:

  • An asset-split and strategy suitable to your long-term plans and intentions
  • Diversified portfolios containing hundreds/thousands of the best companies of the world
  • Paying fees that are in line with the value you receive and are fully transparent
  • Gains will be taxed via CGT or Exit Tax, as determined by your plan and circumstances

PART ONE: Where Exactly Are We Now

Assuming you are invested in something like an 80% Growth (Equity) and 20% Defensive (Bonds/Other) Portfolio, the value of your pension is/should be up approximately 20% to 50% over the past 7 years. Yes, your values have grown over the past 7 and a bit years. It might not feel like it, but as of 3rd October 2022, you are winning, and depending on which provider you use, you are winning well.

Your plans are worth far more than what you put in, assuming you have been investing since 2015! €500k put into Vanguard 80/20 is worth in the region of €780k today. We are up.

(I note such a wide spread of total returns here due to the variance in returns between many of the insurance-based options available to people in the market. See the below graph for a comparison of our preferred route of pure investments from the likes of Vanguard, and the main funds available through mainstream players. You couldn’t write it).

‘Pure Investments’ like Vanguard Vs ‘The Rest’ – You Are Winning

So, either way, you are winning. Well done!

The human brain is wired to avoid loss. We hate it when we suffer a loss of pride, loss of money, loss of relationships, loss of purpose etc. This bias towards ‘Loss Aversion‘ is part of the reason why we have succeeded as a race!

However, it also means we are hyper aware of anything that might cause us loss. And the media know this, so they pepper us with scary loss-filled headlines! Loss worries us more than winning pleases us.

PART TWO: What We Know

MSCI is down c30% since the start of the year, and c10% in the past month alone.

But we knew this was coming, right? We know that equities, especially the globally diversified variety, have fallen on average by 30% or more every 5 years, average.

We know too that equities have temporarily fallen by an average of more than 14% every single year since 1980. Yet, a patient investor (in the S&P500, for example) has achieved average annual returns of over 9%, per year! The past 7 years, as we saw earlier, have been no different, despite what we have experienced in that time.

JP Morgan Guide To The Markets, Slide 15, September 2022

PART THREE: When Will Markets Recover?

Nobody knows. Now? Possibly. 12 Months? Possibly. Imminently? Possibly.

Most who claim to know such are saying ‘things’ will get worse before they get better.

They may or may not be right. Fact.

The Important thing to recognise is that it will end. It may be 2 months, it may be 5 years, it may be longer. The shortest ‘Bear Market’ in the past 70 years was 1 month, and the longest was just short of 2 years. But we know that all bear markets have ended, and been followed with significant rises in the values of our well diversified and prudent pension and investments.

Interestingly, Ben Carlson did recent research on this very topic! The worst 5-year returns following the S&P500 being down 25% or more (9 times since 1950 he suggests), was +21%, and the average 5-year returns was over +80%.

Ben Carlson, via Y-Charts.

But are we at the bottom? We don’t know. But we can see what has happened following years of us hitting it!

This Public Service Announcement, in Summary:

We may all feel some fear, and that’s OK. What is not OK is to panic and to knee-jerk react. We must retain calm and recognise that this is when and where we may our money as long-term investors. We don’t get to enjoy the long-term outcomes if we can’t withstand these rough times.

Indeed, if you don’t believe that we will be rewarded, why are you still invested? So, without trying to read your mind, if you are still invested, you believe things will improve. There is, therefore, little to be gained by worrying about it.

This too shall pass.

Thanks for reading, and I hope it helps.


#This is not investment advice – seek proper help if you need it#

Some other posts you might find interesting.

When bonds and equities fall

Keeping Perspective in a market decline

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