By its nature a pension or retirement plan is a long term investment.
Invest for the Long term
A pension or retirement plan is a long term investment.
The temptation for investors is to react to market news and try to protect themselves against any falls or chase higher returns by following a particular trend, however when doing so they are really only looking at the short-term issues that create market volatility. To help protect yourself from bad short-term decisions you should set out your strategic investment goals with a long term time horizon in mind, and as you get closer to your retirement then start to make some shorter term decisions to preserve what you have built up.
As you continue to contribute to your plan your contributions will buy units in your chosen funds at different prices, for example when markets are rising you will pay more per unit and when markets are falling you will pay less. But this is actually a very good thing for regular savers as they will benefit from “unit cost averaging”, which means you will have bought more units when the price was lower and less units when the price was higher. When you come to sell your units to take your benefits from your plan it is the difference between the sale price you achieve against the average unit cost of the total units you purchased which will determine how well your investments have performed. Unit cost averaging will have helped smooth out your exposure during any volatile periods whilst you were building up your pot.