How do self investors decide on asset/fund allocation?

TBC15 wrote: »

Is there an idiots guide/worked through example to these rules based on say £1,000,000 pot and £40,000 draw down.

Have a look here for a start

https://www.bogleheads.org/wiki/Safe_withdrawal_rates

jamesd wrote: »

I link to some examples of calculating safe withdrawal rates here. There's discussion of how to use the Guton-Klinger rules here.

The boggleheads page is OK on the history but it's about five years behind the research, enough to make a substantial difference. Boggleheads refers to fans of the buy and hold philosophy of Jack Bogle, founder of the Vanguard fund management firm best known for its tracker funds. I don't know whether that's the reason that the more recent research, which varies the investment mixture over time to reduce risk and increase the safe withdrawal rate, is missing from their page. I'd say that most of it is old enough now to be obsolete, it doesn't even get as far as Guyton-Klinger, just Guyton's original take that he improved on with Klinger a few years later.

The Bogleheads page is a good starting point.......and probably more than most people need. There are regular research papers about withdrawal methods and asset mixes and it's fun to look at the nuances. For more detail a search on the forums at bogleheads.org and early-retirement.org will provide lots of information.

With markets so high and value in equities difficult to find I am tending to let FTSE100 run up to highs and then taking positions in ETFs that short the market. It has been working out well whilst I hunt around for value in individual equities.

I've also used ETFs to buy and short oil and the same for GBP/USD.

Shorting can be speculation but that's not all it's for. It can also be used to protect you from stock market falls, say by buying a short option that pays out if the market drops by more than twenty percent over the next three months. That can be used to protect you against big drops.

I've done things like placing a short spread bet to reduce downside risk.

You can also use shorts as part of a plan to obtain leverage. You could pace a long spread bet on the FTSE and a three month in the future short bet that it won't be more than twenty percent lower on that future date. That constrains the downside risk but you do still need to be able to cover drops above twenty percent until the specified date. Then you can invest the money you don't need for this somewhere else, like in P2P.