Contrarian view on asset allocation

EdInvestor

Oompa_Lumpa wrote:

Everyone knows that asset allocation is important, and that a balanced portfolio is essential, but is it?If you are investing for the long haul (say retirement in 20 years or longer) why should you not have 100% of your investments as equities? We know that equities are the best performing class of investment over such a time frame, so why do we want to dilute the total return on our portfolio by having some bonds or fixed interest?

I would tend to agree with this. If a person has saved a good cash fund and is buying their own home, then I would simply concentrate on acquiring a portfolio of big blue chip shares through a cheap broker like the Halifax Sharebuilder account, which minimizes chgarges. I would reinvest the dividends and enclose the portfolio in an ISA annually as it grows in size. Over time this should grow into a substantial fund which will have no tax liability and extremely low charges.

Of course some pople just can't cope with the fact that share prices wobble up and down so they may be better to save in cash and property.

But I agree that it's not worth young people bothering with bonds - or property funds for that matter.Keep it simple. Cash fund, house, shares. (Many big UK companies are global businesses,so you get overseas exposure automatically, no need to wade through all those overseas funds.)

dunstonh

But I agree that it's not worth young people bothering with bonds - or property funds for that matter.Keep it simple. Cash fund, house, shares. (Many big UK companies are global businesses,so you get overseas exposure automatically, no need to wade through all those overseas funds.)

I totally disagree. You are assuming everyone is of the same risk you are and that is a common error with amateur investing and even low skilled/low experience investors. You should not impose your own risk profile onto others who may be lower or higher than you.

Also your assumption about UK companies giving you overseas exposure is incorrect. Whilst they will almost certainly have overseas trading, you dont come close to the optimal exposure required to benefit from it. With the exception of the US, most overseas funds have outperformed the UK over many timescales. Ignore them at your own loss.

Also, take one of my favourite funds for the last few years, JPM Natural Resources, that is way above most people's risk profile so you use the lower risk funds to counterbalance it. Rebalancing works best when utilised with low risk funds as well.