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As a long-term investor, a Self-Invested Personal Pension (SIPP) gives me the opportunity to take advantage of my preferred long-term horizons. But, like any other investment vehicle, a SIPP will eventually increase (or decrease) in value based on what I do with it.
With that in mind, here are three ways I try and increase the final value of my SIPP.
1. Higher contributions
Many of us view inflation as a financial enemy that eats away at the long-term value of investments including pensions. After all, £1,000 today is probably worth more than £1,000 a decade or two from now.
But that can also be used to my advantage. Investing in a SIPP today can mean it has the potential to grow in value over time. By simply making more contributions now, I hope to have a bigger pension pot later.
2. Cost management
Different SIPP providers charge different fees and charges. From one day to the next, the difference may not seem huge. But remember, most investors will use three, four SIPPs. or even decades more. At such a time, even seemingly small expenses can add up.
So now that I’ve set up a SIPP, I don’t just ignore the charges. Instead, I occasionally check to see if I’m getting what I think is a good deal, or if I should consider moving my SIPP to another provider.
3. Focus on long-term wealth accumulation
I also aim to increase the value of my SIPP by investing regularly with a long-term mindset. I also invest in dividends, looking at what the company is likely to do in ten years and not just in the short term, and I also consider risks that could change the long-term prospects of the companies I invest in.
That helps explain why one of the shares I have in my SIPP is that Prudential (LSE: PRU). Another concern I have about some of the stocks I own is market volatility. But Prudential’s market for people looking for financial products like life and health insurance is huge.
By focusing on developing markets like Vietnam, the company is positioning itself to take advantage of growing demand as people become wealthier and more willing to take out insurance that can help protect them if things go wrong.
There are risks to such a strategy. Weak demand in China affects the company’s performance and developing markets always bring political risks, such as currency exchange rate movements.
But looking at where I think things are going ten years from now and not next week, I hope I can build a SIPP full of stocks that are set to benefit over time from changing demographics and consumer needs.
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