Investing for retirement can be tied to many concerns and worries as to whether you are making the right decision – after all, investments can go down as well as up!
Thankfully, there are ways to hedge against risk and mitigate the chances that your investment goes south, with many personal plans offering broad diversification to ensure that your eggs do not all end up in one basket.
In this series of articles aimed at demystifying the world of pensions, BOV Manager within the Bancassurance Office Claire Falzon has explained what private pensions are, delved into pension adequacy, how you can get one going, the attractive tax rebates offered on one’s contributions, and the flexibilty on offer.
Here, she explains the benefits of a unit-linked pension plan:
“One of the ways to invest in a personal pension plan, is to have your investment linked to a set of underlying funds.
“But what is a fund?
“Put simply, a fund is a collection of different securities which mitigate your risk through diversification. The value may go up and down according to economic cycles but when investing on a regular basis – like in the case of a Personal Pension Plan – one would be capturing various different prices the fund is trading in on the particular dates of execution.
“This would help to average out the purchase prices of the underlying funds.
“The long term nature of such plans makes it appropriate to invest in unit-linked investments given that the performance of the latter tend to outperform the more conservative investment over the long term.”
An Expert Explains is a BusinessNow.mt initiative to improve economic financial literacy by inviting industry leaders to explain technical terms in a manner that can be understood by a general audience. If you would like to suggest a term or concept for our network of professionals to break down, or if you are an expert willing to contribute to this column, send us a message on our Facebook Page.
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