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What To Do With My Investments and Pensions In A Declining Market? Blog 138

16th March 2020

Paddy Delaney

What to do with my investments and Pensions in a declining Market? Absolutely Nothing. That is all.

Realising that you may require a little more of an explanation I will elaborate a little. Whilst nobody knows how long or how deep the current market declines will be – I do know that this won’t be a long piece!

I’ll sacrifice the enjoyment I get from writing and getting into the details, by keeping this piece as concise as possible. This piece is an attempt at sharing a couple of simple messages which I hope will help if you are feeling the pressure (I don’t need to elaborate do I!?)

In my view, there are two main stages of our Financial Lives, the Accumulation phase and the Spending phase. The accumulation phase is every minute of our lives before we step out of full-time employment. In this phase we are working full or part-time, spending what we need and hopefully saving and squirreling-away everything else.

Once we decide to become free of that paid employment we rely on these ‘nuts’ that we buried while in the Accumulation phase. We unearth these, hoping that they are at least as nutritious and tasty as they were when we buried them initially!

OK, enough of the squirrel analogies – I promised to be concise here!

What is A Bear Market?

When markets decline by 20% or more they are commonly referred to as a ‘Bear Market’. I’m not the only one who occasionally gets Bull Markets and Bear Markets confused! To help us remember, here is the origin of the two terms; Bear Markets supposedly got their name from the way a bear would attack it’s dinner, by swiping downwards with it’s claws. Whereas a Bull thrusts upwards with it’s horns, hence Bull Markets. Sound a bit daft to me, but that’s the story – hope it helps!

The important thing I want to share today about Bear Markets are that they are absolutely normal. Depending on which piece of research you look at we have experienced in the region of 30 of them over the past 120 years – so on average we expect one every 4 to 5 years. We also expect them to deliver us average declines of 30%. Therefore some of them will be less than 30% declines, and some will be more.

When we look back at charts, such as the one below from Finalytiq, it is all very black and white – markets go up and they go down. They go up more than they go down, and the constant upward curve suggests that all declines have been temporary, and the ascent has been permanent. Looking at the chart it all feels very nice and simple, the markets fell 50% in 2008 and then they stormed back to quadruple over the following years. However, what is very easy to forget is that when we are in the eye of the storm it will feel pretty nasty. When we are living in it, it feels a lot worse than we recall when we look at the chart. The human brain has mastered the art of locking away the pain of past events – allowing us to go once more into the breach. I was fortunate to witness my wife go through the pain of child-birth without as much as a blast of ‘air’ a couple of years ago. If you ask her now she will recall it as being a lovely pleasant event. Eh, that’s not how I remember it!!

The point I am trying to make here is that when we look back on the chart, we think “Oh yeah, I remember that – it was rough enough but it all worked out great. And you know, it was a great opportunity to buy more equities at discounted prices wasn’t it?”. However, when we were actually in the middle of that storm, many of us were paralysed, many of us stopped pension funding entirely, even though we could afford to continue. Worse still, many of us switched our entire portfolios to ‘safe funds’ like cash and bonds, and left them there and missed the 300% bounce! When we subsequently reflected on that we realised those were mistakes, and we promised not to repeat them, right!?!


It is my sincere wish that when you established your portfolios you knew what you were getting into. You may have been using one, or a combination of the following, in your accumulation strategy:

  • Deposit account
  • Equity/Bonds based Investment
  • Equity/Bonds based Regular saver
  • Pension fund of some sort – PRSA, PRB, Self Administered, Occupational Pension

Irrespective, whatever approach you took I hope you knew the link between volatility and returns. That is, if you pursue low volatility you are accepting low returns. If you pursue high volatility, you are accepting high returns. These assumptions have always played-out over the long term – nothing has changed.

But what if you are accumulating, and are perhaps within a year or so of retirement, of drawing your tax free lump sum? I assume you and your advisor will have discussed the possibility of current events, and allowed for them in your strategy. If you opted to go 100% Equity then you’ll accept that you may decide to wait for markets to recover before taking your lump sum – or perhaps you’ll be happy enough to take the lump sum irrespective of the values – again, these conversations will hopefully have already been had, and you accept the outcomes.

If you are more than a few years away from finishing your accumulation, then the current environment is indeed a positive – really. I totally empathise that we would prefer if it were not like this, but these periods of decline are what we know, what we expect, and what I believe we should come to appreciate. It is at time like these, to put it coldly, when wealth passes from the impatient to the patient.

A perfect example of this is the recent reports in the Financial Times of $23BN Net Outflows from equities last week. Yes, you heard it, $24Bn more cash left equity markets than entered it last week Globally. If this was large active fund managers, institutional investors, and individual investors trying to time the market, I’m sorry they are on a fools errand and most of them will lose their shirt. Those that remain patiently invested for the long term have always been the ones to win in these circumstances.

The fact is, you are now buying units of your underlying funds at discounted prices. This ‘sale’ may last for a few months or indeed a few years, either way you are getting more units for your same monthly investment than you have in a couple of years. Make sure your strategy is one which allows for potential significant recovery in values, and potential deterioration or plateauing of values. Do that, and you’ll be well positioned for whatever comes our way.


If you have already graduated from earned income – you are now feasting on the reserves you accumulated throughout your working life. While it might not feel like it, you are in a position that many tens of thousands of Accumulators would love to be!

You may be drawing on your Pension, and perhaps also from personal investments that you saved over the years. If you are like many such people, you will be eagerly watching the news, watching that ‘ticker’ as it flashes across the screen, compounding your fears. These are scary situations, no doubt about it (markets-wise, not to mention the pandemic).

Through some of our previous pieces I hope you can garner some respite from the media frenzy. Your long term, multi-decade income will not be made nor lost in any 1 year, never mind in any 1 week! Your long term sustainable income has stood it’s best hope when you have stuck to the plan, reviewed your draw-down strategy once per year – fretting and worrying about it will feel like the right thing to do. However, try your best to focus on your actual life priorities until you are approaching your annual strategy conversation with your advisor.

Read Blog 120 or listen to Podcast 148 and consider the long term facts of retirement income draw-down. I hope they help.

Should I Change My Investment Strategy


The above concise answer might seem a bit stark – but it is the right answer to a potentially costly question. Assuming you have established your portfolio in a way that accounts for the FACT that markets experience, on average, a 30% decline every 5 years, and an annual temporary decline every year of the other 4 years, of 14%, you are already where you need to be.

I was a tiny bit spooked myself when I had a look back a minute ago at an old piece I wrote called, ‘The Crash Is Coming‘ in June 2017. In it I asked you, dear reader, to consider what it would be like if it was 2020 and markets and therefore your pensions and investments had declined by 30%. Oh, before you ask, I can assure you, I still hold zero claim to be able to predict market movements!! This is an averages game – just watch MoneyBall if you want a non-investment-related example of what I mean!

But, but, but I hear you say, my portfolio is down 20%, 25% , 30%, or heaven knows where by the time this piece is published on Monday night 16th March (writing it 13th and 15th March 2020). All historical evidence has shown that you sticking to the well considered plan you had is key to success over the long term.

And I guess that final sentence really is critical to all that I believe in. If you did not have a plan, did not know what you were getting into, then this is exceptionally scary times.

On the other hand, and it is my wish that everyone does eventually get to this point, you have a clear financial plan. If you do have one, you will know that this is as we expect. You will also know that you are well prepared for whatever short-term challenges will come your way. You will therefore be many times more likely to have less concerns, and fears. You are therefore many times more likely to remain on track, and to avoid the costly mistakes that many others have made in the past during such scary times.

This, I guess, is another critical rationale for never having an investment or a pension without first establishing a plan. A squirrel will never hide her nuts without knowing where to harvest them from when the time comes. Be a squirrel!

Paddy Delaney

Read Blog 120 – Managing Your ARF Income and Spending Strategies

Listen to Podcast 148 – Effective Retirement Income Portfolios

Read Blog 134 – Signs That You Need An Independent Financial Advisor

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