Actively manage your pension

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.

  1. It is a long term investment, therefore compounding would turn a small sustained improvement in performance into a large gain.
  2. 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.
  3. Because it is important, most people are unlikely to be unduly speculative with it either.
  4. There are tax advantages. The exemption from capital gains tax, for example, could be very valuable to a successful active investor.
  5. If things do go wrong, youngish people have time to make extra savings to make up for them.
  6. 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.