Most people are quite happy to allow a fund manager to look after their pension, even those who actively manage other investments. I suggest the opposite. There are very good reasons for concentrating on your pension.
My arguments assume that it is a long term investment: this does not apply to people who are close to retirement.
- It is a long term investment, therefore compounding would turn a small sustained improvement in performance into a large gain.
- Because the money is locked away, it is easier to make impartial judgements that are not skewed by greed and fear: most active investors’ biggest problem.
- Because it is important, most people are unlikely to be unduly speculative with it either.
- There are tax advantages. The exemption from capital gains tax, for example, could be very valuable to a successful active investor.
- If things do go wrong, youngish people have time to make extra savings to make up for them.
- Equities outperform fairly reliably over the long term. With a pension fund you can be sure that it is locked away for the long term.