no goals - wtd?
Comments
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bowlhead99 wrote: »So well done, you have a portfolio that's half very low risk and half very high risk. That doesn't sound much like what someone of sound mind would put together, whether or not they were financing it with borrowed money like you.
Thinking to yourself, "hmm, do I want really low risk or really high risk... ooh, I have no idea, how about I just get half of each so that I don't have to deal with the question, I'll just sit here on the fence", sounds like a total cop-out.
You are not a child being asked his favorite colour and needing an instant answer off the top of your head. Give it some thought, like a grown-up.
I've given it a lot of thought and appreciate your advice (if not your manner).
I do not see the offset as a low risk investment - it is simply reducing the mortgage to 25%.
In effect, I would be taking a secured loan of 25% on the house to risk in the global equities for 15 years. This is equivalent to about 3-4 years salary. A 50% loss would mean 2 years more work, a 50% gain 2 years less...0 -
OK, so it's not like you have a really low-risk investment right next to a really high risk one.I've given it a lot of thought and appreciate your advice (if not your manner).
I do not see the offset as a low risk investment - it is simply reducing the mortgage to 25%.
You just have no investment right next to a really high risk one.
It sounds like you are relatively new to the investment game, so initial advice would usually to go into a mix of investments across the risk spectrum rather than fully in global equities. And frankly that's decent advice for people who are not new to investing too, depending on timescales.
It seems in your case you would be planning to go fully into global equities with your non-cash bit, and then only with the relatively smaller amount of new money going into the ISA (over and above the money from the mortgage) would you go anything other than all-out global equities. That makes it a relatively high risk idea.
I think the 15 years was missing from earlier posts so it gives some context. Although presumably your mortgage isn't fixed at its current rate for that long, if it's a tracker. But you would generally expect investment returns to exceed mortgage returns over a long long timescale, as they're unsecured while the mortgage is not, so the lender doesn't demand as high a return.In effect, I would be taking a secured loan of 25% on the house to risk in the global equities for 15 years. This is equivalent to about 3-4 years salary. A 50% loss would mean 2 years more work, a 50% gain 2 years less...
However I'd be careful in presuming that if £x is four years salary, then if you lose 0.5x you can just work two more years. For example in my case, there are already commitments on my salary, like paying my taxes, bills etc and so I can't pay a whole years salary off the mortgage when I get a whole year's salary in the door.
The sums are different for everyone though, these are just some of the things it's worth considering if you haven't.
It has worked for some people on this site, but not for all. The people with the great results have generally done it when they were fortunate to be investing over a great period for equity markets.0 -
very useful thanks. What do you think of:
50% LTV mortgage comprising
....50% cash offset.
....50% ISA investments. comprising:
........50% active (managed global equity)
........50% passive (passive global equity)
Money over and above offset (not spent on living!):
....50% equity / 50% bond (split 50/50 Active/Passive)
How about that for fence sitting :-)
I see no point in treating the investments you make from what is currently spare money separately from that you release from the offset. It's all one pot to be managed.
It would be more sensible to divide up your assets on a basis related to your objectives. For example it may be sensible to keep enough in the offset to meet repayments for 1-3 years. You could then perhaps start off with enough in safer investments to meet another say 3-5 years of repayments and the rest in equity. Each year you could rebalance between the offset, safer investments and the higher risk equity keeping %s the same. The objective being to buy rather than selling equity when prices are low,
There is no point in splitting between passive and active. Again you need to look at the equity portion as a whole and devise an allocation diversified across countries, sectors and company sizes. Whether you choose active or passive funds to meet that allocation is a matter of religion and choice of the best one for the purpose.0 -
bowlhead99 wrote: »That makes it a relatively high risk idea.
However I'd be careful in presuming that if £x is four years salary, then if you lose 0.5x you can just work two more years. For example in my case, there are already commitments on my salary, like paying my taxes, bills etc and so I can't pay a whole years salary off the mortgage when I get a whole year's salary in the door.
thanks for that insight and the other advice - and you are right - it would be more like working an additional 5 years - not so great. Need to have a rethink...0 -
I see no point in treating the investments you make from what is currently spare money separately from that you release from the offset. It's all one pot to be managed.
It would be more sensible to divide up your assets on a basis related to your objectives. For example it may be sensible to keep enough in the offset to meet repayments for 1-3 years. You could then perhaps start off with enough in safer investments to meet another say 3-5 years of repayments and the rest in equity. Each year you could rebalance between the offset, safer investments and the higher risk equity keeping %s the same. The objective being to buy rather than selling equity when prices are low,
There is no point in splitting between passive and active.
Its an interest only offset mortgage so I have made no repayments - it is fully offset so is, in effect, paid off?
No objectives either, other than to retire in 15-25 years.
I like your proposal - what I probably need to think about is having a value for the offset as a target which mimics a repayment mortgage over the term.0 -
The interest rate is lifetime tracker currently 2.14%
Currently a tax-free risk-free return on cash of 2.14% p.a. is pretty good.
The question is whether you want to borrow money - because that's what it comes to - to invest in equities, and if so, how much. In turn, the first resolves into two questions. (i) Do you want to invest in equities with this money at all, and (ii) if so, is now a good time to do it?
Only you can answer (i); my guess for (ii) is that now is not a particularly good time to do it.
But you have 15-25 years before retirement. Why not put your toe in the water by investing your monthly surplus income to begin with?Free the dunston one next time too.0 -
Why not pay off the mortgage then think about investing? At least then you won't lose the house. There's no 'safe' accounts paying over 2% return (except with some faffing around for small amounts in current accounts) so you'd be gambling for a higher return somewhere else.0
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The question is whether you want to borrow money - because that's what it comes to - to invest in equities, and if so, how much. In turn, the first resolves into two questions. (i) Do you want to invest in equities with this money at all, and (ii) if so, is now a good time to do it?
Only you can answer (i); my guess for (ii) is that now is not a particularly good time to do it.
But you have 15-25 years before retirement. Why not put your toe in the water by investing your monthly surplus income to begin with?
Global equities are my choice of investment - they are liquid, yield without any effort on my behalf and diverse. Yes, toe in water seems a good idea...0
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