Why time in the market beats timing the market when it comes to investing

“Time in the market beats timing the market.”

It’s a common investment adage, sometimes described as the “golden rule” of investing. But constant repetition doesn’t make it any less relevant today.

“Timing the market” is a strategy by both professional investors and amateur stock-pickers. Their approach is to try and buy stocks when the value is low, and then sell when it’s high.

Sometimes it will work, and they will show a tidy profit. Frequently, however, even seasoned professionals fail to accurately predict market movements.

History and experience show that you’re more likely to see the value of your investments increase over an extended period if you simply sit tight and do nothing rather than constantly adjust your portfolio holdings. Read on to find out why.

Research shows the perils of trying to time the market

Research published in...

Markets can often be volatile, potentially spooking investors. We explain how to remain calm and avoid making rash decisions.

Stock market downturns are part and parcel of investing. So far this year stock markets around the world have been tough to say the very least, as global events have conspired to create difficult conditions. How investors react can have an impact on their investment portfolios, as much as how the markets behave.

What should you do in the face of stock market turbulence? Here are four key points to bear in mind.

1. Don’t panic and flee

Try not to succumb to panic and sell your investments when financial markets are falling. It’s tempting, perhaps with a view to getting back in when things have calmed down. But timing the market is extremely difficult.

The problem is that it’s almost impossible to tell whether economies and markets are suffering from a prolonged crisis, such as the credit crunch of 2008 and 2009, or merely a...

There’s no definitive answer to this as it all depends on the individual and what their goals are when they retire. If you want to continue living a fairly normal lifestyle you will require a much smaller fund than someone who wants to jet off around the world. If you, as an individual, qualify for the state pension you will receive approximately €1,075 per month, this can vary depending on if you have a dependent spouse and  your overall PRSI contributions etc. 

If you’re working with a pension then the actual amount you need to have can be determined by your income need and then working backwards to determine the fund required to generate it.  

To do this we would use the standard figure of 4%. 

We use 4% because it represents the standard annuity rate and is also the globally accepted, sustainable rate of withdrawal from post-retirement investment funds i.e. Approved Retirement Funds (ARF) in Ireland. 

If we work with that, then each...

The State Pension age should not rise beyond the age of 66, an Oireachtas committee examining the recommendations of the Pensions Commission has said in a report published today. 

It is also seeking flexibility for those with 40 years of contributions to access their State Pension at 65. 

The committee believed that many people aged 66 and over could not be expected to continue working due to the physical and mental stress related to their job. 

The Pensions Commission has proposed to increase the State Pension age by three months every year from 2028. 

This would see the pension age reach 67 in 2031 and it would increase again by three months every two years from 2033 onwards. 

Under this plan the pension age would be set at 68 years from 2039. 

The committee report confirms it was informed by the ESRI that without other policy changes the pension age across Europe would have to rise by five years by 2030 to ensure that State pensions remain...

What is a pension?

A Pension, simply put, is a long-term savings plan to build up a lump sum of money for you to live off in retirement.

Why should I save into a pension?

To ensure you can live comfortably in retirement, as the state pension alone may not allow you to do so. Most experts suggest that you need a pension of at least half your pre-retirement income to live comfortably in your retirement years.

Tax relief is another reason to save into a pension. You will receive income tax relief on contributions made to your pension. This means if you pay tax is 20% a €200 pension contribution each month will only cost you €160 after tax. If you pay tax at 40%, a €200 contribution will only cost you €120 after tax

State pension ticking time bomb

The State Pension is paid out of taxes collected by Revenue, and currently there are five workers to every one person over the age of 65. However, by the year 2051 this will fall to just 2.3 people for every one person over...

Pension Terminology

Risk Level – Each fund has a risk level attached to it which is a guide how risky the fund is. A higher number means a higher risk fund and a lower number means a lower risk fund. A higher risk fund will give you more potential for investment growth. The scale is generally 1 to 7.

Buy Out Bond – A type of retirement product also known as a Personal Retirement Bond

Contributions – These are the payments you pay into the pensions fund. In the case of a Buy out Bond, the only contribution allowed is the transfer from your previous employment. No further contributions are allowed to a Buy out Bond.

What is a Buy Out Bond?

A Buy Out Bond (BOB) which can also be known as a Personal Retirement Bond, is policy that is set up by trustees of a pension scheme to provide retirement benefits for a former member of the scheme. It basically means that if you leave a pension scheme, you can bring your pension benefits with you and take control over it by having...

Pension Terminology

Risk Level – Each fund has a risk level attached to it which is a guide how risky the fund is. A higher number means a higher risk fund and a lower number means a lower risk fund. A higher risk fund will give you more potential for investment growth. The scale is generally 1 to 7.

Tax Relief – Is a tax deduction on your pension contributions. It is an incentive to encourage people to save into their pensions.

Contributions – These are the payments you pay into the pensions fund they can be made in lump sums or recurring monthly premiums.

What is a Personal Pension?

A Personal Pension is an account you can use to save for your retirement. You can make lump or recurring payments into a Personal Pension, and these are usually tax deductible. A Personal Pension can be invested into different types of funds with different risk levels (higher risk means a better chance of high returns but a higher chance of losing your money and lower risk means lower...

Pension Terminology

PRSA – Personal Retirement Savings Account (which is a type of pension).

Risk Level – Each fund has a risk level attached to it which is a guide how risky the fund is, a higher number mean a higher risk and a lower number means a lower risk. The scale is generally 1 to 7.

Tax Relief – Is a tax deduction on your pension contributions. It is an incentive to encourage people to save into their pensions.

Contribution – These are the payments you pay into the pensions fund they can be made in lump sums or recurring.

What is a PRSA?

A PRSA is an account you can use to save for your retirement. You can make lump or recurring payments into a PRSA, and these are usually tax deductible. A PRSA can be invested into different types of funds with different risk levels (higher risk means a better chance of high returns but a higher chance of losing your money and lower risk means lower returns but less chance of the fund decreasing.)

Can anyone get a...

The retirement/pensions industry is guilty of technical jargon that baffles anybody not working in Pensions!

This is particularly prevalent in group pension schemes. If you are that person who recalls being told of a guaranteed pension many moons ago, you may well remember terms like defined benefit, 50% salary etc.

This promise of a guaranteed monthly pension has rapidly evaporated in Ireland, high profile and particularly negative stories like Waterford Crystal pension scheme is a case in point. Thankfully most are not like this, however, they are under financial strain. Group DB schemes are now asking members to consider taking a set amount from these schemes and exiting.

The simple reason is cost, it is a promise that for many they can no longer be kept. However, like anything related to money, it is rarely straightforward! There are a few key questions one needs to ask of their scheme/trustee/themselves or a financial adviser:

• Am I being asked or pressured to take a...

Premier Financial have recently joined a new nationwide group of pension experts that have been set up to improve access to expert pension advice across Ireland.

The Expert Pension's belief is you need "money to retire not age". Whether you have, had or need a pension, you should get the retirement plan that gives you the lifestyle that you want in retirement.

Being part of the group we provide Pension Retirement Plans by using cashflow modelling. Our financial plan is called Premier Financial Plan.

Premier Financial Plan helps you get a deep understanding of your current financial situation, identifies your future cashflow requirements and gives you a clear plan how to achieve this.

We have an 8 step process that is designed to make preparing a financial plan for your future simple. If you want to learn more you can read more about the Premier Financial Plan on our website at this link Premier Financial Plan .

A pension is the most tax efficient asset that you...