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Investing basics

Did you know that you’re already an investor? It might sound like an unusual question, but our Global Retirement Survey discovered that over 40% of people we asked didn’t realise that their retirement savings are invested*

*Fidelity Global Retirement Survey - 2020

When you join your workplace pension, your contributions are automatically invested for you in the plan’s default option. As an investor, you can change this and choose your own investment funds from the range your plan offers. Or you can stay in the default option if you prefer to let experts make the investment decisions for you.

What is an investment fund?

A fund pools money from lots of investors. The fund manager then spreads that money across a variety of investments.

You can choose from a range of funds managed by Fidelity and other leading fund managers. These focus on different sectors, regions and types of investment. Whatever funds you choose, you benefit from the investment expertise and management of a professional fund management team.

Learn about investing

Types of investment

The different types of investments are often referred to as ‘asset classes’ – some common examples include company shares (or ‘equities’), bonds, property and cash.

The performance of different asset classes will naturally vary over time. As they all have their own unique characteristics, wider market conditions and world events will affect them differently. That’s why it’s important to spread your money over a range of investments – it enables you to reduce the risk of your pension savings falling in value if one asset class is out of favour. Investors usually call this strategy ‘diversification’.

Watch our short video about asset classes.

Watch time: 3 mins 2 seconds

Diversification

Diversification is essentially the principle of ‘not putting all your eggs in one basket’.

If you spread out or ‘diversify’ your pension savings across several different investments, in line with your retirement goals and risk tolerance, you’ll be in a better position to withstand any potential losses from a single asset class.

Watch the video to learn how diversification can help in times of market volatility.

Watch time: 1 min 25 seconds

Risk and return

The relationship between risk and return is one of the most important aspects of investment. For you as an investor, risk relates to the possibility that you may not achieve your financial goals or that you get back less than you invest.

Generally speaking, the greater the risk you are prepared to tolerate, the more potential there is for your investments to grow. There is no guarantee that you will get higher returns by accepting more risk, but taking less risk with your investments is likely to mean you see lower returns.

The risk-return spectrum

This image shows a spectrum from assets with lower risk and less growth potential, towards assets carrying higher risk, with the potential for higher growth.

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Risk-return and your workplace pension

When it comes to your workplace pension, you may choose to invest in the plan’s default strategy, where risk-return is already considered. Or you may decide to choose your own investment options. In this case, your tolerance for risk will help you decide which assets to invest in.

Investing when your retirement is some way off

Investing in assets with a higher potential for growth but greater risk is an option. The long-term effects of compound growth may also work in your favour.

Investing when you are nearing retirement

As you approach retirement, you may want to lower the level of risk. This will reduce the possibility of your pension savings falling in value, just when you need to start using them.

Watch this video to see examples of how some people view the relationship between risk and return.

Watch time: 1 min 21 seconds

More about the main asset classes

Cash
Bonds
Equities
Property
Active and passive – different styles of fund management

Important information

It is a good idea to review your pension investments on a regular basis to make sure that they are right for your retirement goals.

None of the information above is a personal recommendation for any particular investment and it’s important to remember that the value of investments can go down as well as up, so you may get back less than you invest.

If you are unsure about whether your investments are suitable for your circumstances, or you need advice on any of the options available to you, we recommend that you speak to an authorised financial adviser.

Helpful links

Want to review your investments?

Login to PlanViewer to see where your workplace pension is invested

Want to make changes to your investments?

Learn more about how to self-select your own investments.

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