The biggest fall in the stock market since the pandemic. How will it affect pension plans in Latvia?

The fact that stock markets are volatile is often overlooked by both pension managers and other representatives of the financial industry. Kārlis Purgailis, chairman of the board of “CBL Asset Management”, a subsidiary of “Citadele” bank, said that after an increase in the stock index in mid-July, a sharp fall followed at the beginning of August.

“For example, the Nasdaq 100, which is an index of large US technology companies, is currently down to minus 15%, and if we look at the broad index of European companies, the Stoxx Europa 600, the fix this around too. 9 Of course, these changes in the value of financial instruments also affect Latvian pensions, that citizens should be sure that this is nothing surprising and that such a correction of the values ​​of the global financial market happens quite regularly.

The total value of pension savings has decreased slightly, but, well, the long-term return of stock pension plans is still positive – both the six-month returns are positive and the five-year returns are also positive,” said Purgailis.

Līga Leitāne, a lecturer and researcher at the Faculty of Economics and Social Sciences of the University of Latvia, emphasized that everyone should also take responsibility for their investments in pension plans, since money can be invested not only in plans active and more dangerous, but also in balanced and conservative plans:

“Well, for example, if we look again at these balanced and conservative plans, yes, conceptually, the return is lower, but its fluctuations are also smaller, because that investment is investment in state bonds, then in bonds, and so they are. therefore, more moderate in terms of profitability whether their pension capital is invested in a more suitable plan.”

Ilya Arefjevs, chairman of the board of the investment management company “Vairo”, explained that there are 2 indisputable facts in the world of investment.

“The fall in the stock markets usually occurs after a large and prolonged rise in stock prices. The profit from investments in the stock markets this year could be zero, last year the profit was about 20%,” said Arfiev.

“However, this in no way reduces the long-term appeal of shares. The real profit of the stock markets crystallizes in the long term, here we are talking about a period of 10, 20, 30 years. And it would be reasonable to count on a profit of up to 10% per year on average before various commissions and tax deductions to ensure that a plan that is suitable for age is chosen long 10, 20 or 30 years, it is safe to stay there the pension plan that invests all the money in company shares If the client has less than 10 years until retirement, this plan could be changed to a more conservative plan for sure.

Concerns about a rapid recovery on stock markets are caused by what is happening in the world, but every investor has a responsibility. The pension administrator can be changed once a year, and the pension plan can be changed twice a year.

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