I was reading a share tipping service called Motley fool a year ago . They did a comparison of investing into a pension or putting money into the S&P 500 or the FTSE 350 over a 40 year period with dividend reinvested.
The S&P trounced the lension
Sorry, but that's a comparison that doesn't actually make sense without explanation of the wider context behind it. Apologies if folks know all this, but it's such an important subject (pensions, investments) and it would most likely be very foolish for someone to stop investing in a pension on reading that quote in isolation, hence me wanting to take the time to try to expand. I'm not in the industry btw.
I know what MF are saying, and with wider understanding of what they are saying it makes sense and is true.
But, it doesn't make sense to say in isolation that 'investing in a pension' beats xxxx. Main reason being that when you invest in a pension you get a choice of what you invest in. For example, my company scheme has 30+ options to choose from!! When i invest in my own pension, I have a choice of thousands of investments, including tracker funds that do invest in the S&P or FTSE.
Also, there's the fact that if it's a company pension, you a) get tax relief on your contributions, and b) you get free contributions from your employer. With sensible investment choices, such a pension would hands down beat simply putting your money into the S&P or FTSE (because of the tax relief and your employers contribution).
The basic point MF are likely making is that, over the long term, virtually NO fund manager will beat 'the market'. And they will charge you handsomely for the privilege!
It can make a lot of sense when choosing your investments to simply go for passive index tracking funds. Invest (ideally by drip feeding in), leave it there, stop worrying about short term movements. Such funds are very low cost (compared to actively managed funds) and also by investing in them you are CERTAIN of getting your full share of long term market growth.
If we were in the USA, investing solely in the S&P could be sufficient, but being in the UK investing solely in the FTSE is probably too parochial / lacking in global diversity. A simple passive (tracking) low cost multi fund with a heavy shares bias is likely to be absolutely fine for pretty much anybody over the medium to long term. Even Warren Buffet advises so.
Anything else is effectively gambling and statistics show you are highly unlikely to win, Same with using investment managers, except you are paying significant money to them and for the actively managed funds they'd typically recommend, which then eats into your available share of simple stock market returns, so lessening even further your chances of 'winning'.
Read or you tube J Bogle, Little book of common sense investing.
