Contractors' Questions: Are my pension shares duds?

Contractor's Question: Following a meeting with a pensions expert, I opted for a Self Invested Personal Pension (SIPP). Looking at my package, 50% of it is tied up in shares in three separate businesses. But I'm a bit worried, as the share price for each of the three companies is pointing downwards. Am I right to worry, and does it sound like I chose the wrong companies to invest in?

Expert's Answer: In your situation, it's important to remember that shares are all about the long term and assuming the fundamentals are sound, you should adopt a 'wait and see' approach, particularly if you're thinking of moving based on one downtick.

However, in terms of managing the risk to a retirement fund it could be argued that concentrating on only three shares may be very unwise. Given that equity markets have recovered robustly since March, it is unusual that none of these three shares had perked up. Therefore if you find yourself in this type of scenario again, it may be time to revisit your stock selection in order to gain greater diversity to your investments.

You may also find that your shares are only focused on the UK economy and this is a concern given the likelihood that the emerging markets will prosper at a greater rate than our own economy over the next ten years. You should therefore consider widening the geographical spread. In addition, think about increasing the number of individual share holdings to minimise risk and increase opportunities for growth.

Another option could be to simply buy unitised investments with your funds instead. These could potentially invest in hundreds of different stocks worldwide and such funds can now be accessed very cost effectively.

The expert was Tony Harris, director of ContractorMoney, an independent financial advisor specialising in tailoring financial solutions to contractors.