PRSA renewal, or withdrawal?

Famous Blue Raincoat

My annual PRSA/AVC renewal is due in the next month. It’s a Standard PRSA, and 100% of it is invested in the Zurich Prisma Max fund at a 1% management fee. I’ve about €20,000 in it and the inflation-linked renewal is a c. €2500 single payment this year.

It lost about 35% of its value at one point in the past few months and still hasn’t recovered fully (it’s about 5% below) to its pre-Covid price (I’m getting this from the graph for my fund on my login page on the Zurich website). Long story short, that significant 35% loss got me thinking about my options with this fund especially in light of the probable economic consequences of the worsening pandemic in the US.

Would it be better to withdraw - or whatever the exact term is - this money now when it’s only 5% less and put it aside somewhere to invest once the market collapses again? I don’t need the cash; I’d just rather put it aside before it declines again. What is the most common thing people do with their PRSA/AVC in this sort of scenario? Thanks.

coylemj

Your fund increased by 29% in 2019. The unit price was 1.632 at the end of 2019 and yesterday (July 9th), it was 1.663 which means it's up 1.9% in 2020, even after a significant market crash.

What is the most common thing people do with their PRSA/AVC in this sort of scenario? Thanks.

They hold their nerve and stay in. A pension is a long term investment, it's not day trading. Attempting to second-guess the market is a recipe for bad timing and a probable loss or missing a market upturn.

Stay put, unless you intend to retire in the next 10 years. In which case you might consider gradually moving into less volatile funds i..e with less exposure to equities.

Geuze

Famous Blue Raincoat wrote: »

Would it be better to withdraw - or whatever the exact term is - this money now when it’s only 5% less and put it aside somewhere to invest once the market collapses again? I don’t need the cash; I’d just rather put it aside before it declines again. What is the most common thing people do with their PRSA/AVC in this sort of scenario? Thanks.

You mean switch funds, as you can't encash until retirement.

Jim2007

Famous Blue Raincoat wrote: »

What is the most common thing people do with their PRSA/AVC in this sort of scenario? Thanks.

Nothing, in fact most of them will have no idea of what you are talking about and they are better off not knowing. When you hear the media saying "investors" this and investors that... replace it with "speculators" this and "speculators" that...

Pension investing is based on a long term strategy and takes into account that there will be bumps along the way and indeed relies on such bumps to grow the fund. If you depart from the strategy, then you should not be surprised of a bad outcome.

Henry Ford III

Assuming you've say 10+ years to retirement I'd stay put and reinvest again.

The J Stands for Jay

coylemj wrote: »

Your fund increased by 29% in 2019. The unit price was 1.632 at the end of 2019 and yesterday (July 9th), it was 1.663 which means it's up 1.9% in 2020, even after a significant market crash.


They hold their nerve and stay in. A pension is a long term investment, it's not day trading. Attempting to second-guess the market is a recipe for bad timing and a probable loss or missing a market upturn.

Stay put, unless you intend to retire in the next 10 years. In which case you might consider gradually moving into less volatile funds i..e with less exposure to equities.

Now could be a decent time to put more money in.

coylemj

McGaggs wrote: »

Now could be a decent time to put more money in.

That boat has sailed. The OP's fund (Zurich Prisma Max) unit price bottomed out at 1.20 on March 24th. By yesterday (July 10th), it had bounced back 39% to 1.663

Proving the point that if you had panicked in March or April and moved your money to the likes of a cash fund, you'd have missed the recovery and would now be sitting on some serious losses compared to someone who sat tight and did nothing. Because that fund is still in positive territory (+2.14%) in 2020.

Famous Blue Raincoat

Thanks for that. I had been thinking if I could just not pay it at the moment I would get more for my money when prices go down again - as I expect they will with the next wave. Would it be possible just to delay it and then ring up in October of whenever and activate it when prices are lower?

The way I set it up is as a single annual payment so therefore it will be invested in one go in the next couple of weeks at current prices which are higher. Perhaps i should change the frequency?

Henry Ford III

Famous Blue Raincoat wrote: »

Thanks for that. I had been thinking if I could just not pay it at the moment I would get more for my money when prices go down again - as I expect they will with the next wave. Would it be possible just to delay it and then ring up in October of whenever and activate it when prices are lower?

The way I set it up is as a single annual payment so therefore it will be invested in one go in the next couple of weeks at current prices which are higher. Perhaps i should change the frequency?

Pay monthly and keep paying. You'll never call a market properly.

coylemj

Famous Blue Raincoat wrote: »

Thanks for that. I had been thinking if I could just not pay it at the moment I would get more for my money when prices go down again - as I expect they will with the next wave.

You use the future tense to refer to 'the next wave' Several large US states (the ones who reopened early) are bang in the middle of a catastrophic second wave and the markets have not tanked. As of yesterday, your fund is up 2.45% since Jan 1.

You can't second guess the markets and you can only tell when stock prices have bottomed out after it happens. So you're wasting your time trying to pick the right time to invest.

colm_c

Pensions are a long term investment, trying to time the market is not a good idea.

It's about incremental contributions and compounding interest over a long, long period of time.

Pay monthly if you can, the earlier you get in, the longer they can grow.