It is important that an individual can chose from a range of funds which will match their needs in terms of their age and attitude to risk. The range of suitable funds options should have the following principles:
- include a variety of funds to meet the distinct and different investment risk and return objectives of the individual.
- at least one fund should offer the individual the prospect of strong long term growth in the value of their retirement savings (e.g. managed or equity).
- at least one fund should offer the individual protection against changes to the cost of purchasing pensions (e.g. bond fund).
- at least one fund should offer the individual complete capital protection (e.g. cash fund).
Investment options can be split into three broad categories:
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High risk
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Medium risk
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Low risk
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Geographic equity fund
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Managed funds
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Cash funds
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Global equity fund
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Consensus funds
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Bond funds
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Concentrated equity fund
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Lifestyle funds
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Guaranteed funds
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Property funds
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These risk categories are based around volatility of returns. However, what risk constitutes to one individual is not the same as to another. For somebody close to retirement, an equity fund is risky because a sharp fall in markets just before retirement will result in a lower pension fund. For a 25 year old, cash is the riskiest asset because the returns achieved will not match the salary inflation they will experience over the 40 or so years to retirement.
Grant Thornton Financial Counselling Limited is the Financial Planning arm of the Grant Thornton practice in Ireland and has offices in Dublin and in Limerick.
Grant Thornton Financial Counselling Limited is regulated by the Financial Regulator. Registered office: 24-26 City Quay, Dublin 2. Company registration no. 102489.
Grant Thornton is authorised by The Institute of Chartered Accountants in Ireland to conduct investment business under the Investment Intermediaries Act 1995.