Portfolio analysis

Loughton_Monkey

LongTermLurker wrote: »

Must admit I hadn't heard of it, but assumed it was a list of countries, ala BRICs, from the context...

Yes. Very much the same thing.

I lay awake at night hoping we don't get problems in Slovakia, Hungary, Israel, Turkey, otherwise we're all in it!

LongTermLurker

Loughton_Monkey wrote: »

Yes. Very much the same thing.

I lay awake at night hoping we don't get problems in Slovakia, Hungary, Israel, Turkey, otherwise we're all in it!

off topic, but it reminds me of the Computer Literacy And IT course name, CLAIT - it's the only time anyone's included "and" in an acronym, but I guess it was safer :rotfl:

Loughton_Monkey

LongTermLurker wrote: »

off topic, but it reminds me of the Computer Literacy And IT course name, CLAIT - it's the only time anyone's included "and" in an acronym, but I guess it was safer :rotfl:

Gordon Brittas did that too!

His 'Customer Service' initiative was wrapped up as "Courtesy, Respect And Patience". Santander, take note!

jamesd

That looks like over 30% in emerging markets or Aasia-Pacific and not a lot at the low risk end to compensate for that so high to speculative is where I'd put it overall. It seems consistent with your attitude to risk, funding level and objective.

Given my - speculative or at least above high - risk tolerance I'd double or more the Aberdeen emerging Markets and JPM Natural Resources pieces. That would be a bet on continued economic recovery, so it may be quite volatile. Then perhaps reduce this exposure once the recovery is solidly in place and everyone and the sunday papers have been writing about it as a sure thing for a while.

My view is that we're in a general global recovery that will continue, but with uncertain timeline, and that I'm unlikely to see a repeat within my main retirement investing time horizon, so I should be positioned to exploit it to its maximum potential. Given your objective and timeline you might consider this view also, particularly given the amounts of money that you will be adding over the years.

This view also makes now an excellent time to be keeping spending as low as possible and investing as high as possible, so you get in relatively early in the cycle and benefit from the growth for the longest possible time. Then relax a bit after a year or two once the initial capital value is beefed up by the high initial saving rate.

If things turn out badly I, and probably you, would need to lengthen our retirement planning horizons, though it looks as though from a zero start I'll be at my basic (minimum) retirement planning target within seven years, since I'm almost there at 5.5 years. Few people would be willing to save and invest over 60% of their income to achieve the target as quickly, though, and most, including me, would ultimately want more than my minimal initial target.

peterg1965

jamesd wrote: »

That looks like over 30% in emerging markets or Aasia-Pacific and not a lot at the low risk end to compensate for that so high to speculative is where I'd put it overall. It seems consistent with your attitude to risk, funding level and objective.

Given my - speculative or at least above high - risk tolerance I'd double or more the Aberdeen emerging Markets and JPM Natural Resources pieces. That would be a bet on continued economic recovery, so it may be quite volatile. Then perhaps reduce this exposure once the recovery is solidly in place and everyone and the sunday papers have been writing about it as a sure thing for a while.

My view is that we're in a general global recovery that will continue, but with uncertain timeline, and that I'm unlikely to see a repeat within my main retirement investing time horizon, so I should be positioned to exploit it to its maximum potential. Given your objective and timeline you might consider this view also, particularly given the amounts of
money that you will be adding over the years.

This view also makes now an excellent time to be keeping spending as low as possible and investing as high as possible, so you get in relatively
early in the cycle and benefit from the growth for the longest possible time. Then relax a bit after a year or two once the initial capital value is beefed up by the high initial saving rate.

If things turn out badly I, and probably you, would need to lengthen our retirement planning horizons, though it looks as though from a zero start I'll be at my basic (minimum) retirement planning target within seven years, since I'm almost there at 5.5 years. Few people would be willing to save and invest over 60% of their income to achieve the target as quickly, though, and most, including me, would ultimately want more
than my minimal initial target.

James, thanks. glad to hear that someone things my goal is achievable. my biggest concern is the possible changes to limits to pension funding from next April. the way non contributory DB schemes will be valued could be mean I have to limit the SIPP funding.

meanwhile, I may well look at my exposure to EMs to reap the benefit of a rising market in the shortish term. My immediate goal is £100k in the fund by the end of next year. I may be able to add the odd lump sump along the way.

My long term target is, mortgage free with about £70k/per annum in pensions (final salary + SIPP drawdown) and £100k in the bank by the
time I reach 55 in 10 years. I feel I am on track, but a lot can happen in that time.

jamesd

Yes, I think it's achievable given sufficient income, sufficient commitment and a sufficiently low target income to be achievable. Takes balance between those things.

On the mortgage side, mortgage overpayments are interesting as an investment because they give low return but are safe. That makes them of greatest interest towards the end of a target period. At the start, investments that pay more look better because you get the higher returns compounding for longer. What I'm doing is primarily a pension mortgage, since that serves the multiple purposes of maximising tax relief, getting the property paid for and also leaving the remaining 75% to provide income. ISA is a backup to that.

peterg1965

jamesd wrote: »

Yes, I think it's achievable given sufficient income, sufficient commitment and a sufficiently low target income to be achievable. Takes balance between those things.

On the mortgage side, mortgage overpayments are interesting as an investment because they give low return but are safe. That makes them of greatest interest towards the end of a target period. At the start, investments that pay more look better because you get the higher returns compounding for longer. What I'm doing is primarily a pension mortgage, since that serves the multiple purposes of maximising tax relief, getting the property paid for and also leaving the remaining 75% to provide income. ISA is a backup to that.

My (large) mortgage is currently interest only, so that I can maximise savings (ISAs and SIPP). It will be paid off, half by by occ pension lump sum and half by the SIPP tax free lump sum, with fall back of my ISA savings. I know it is not a barking mad idea, I had IFA advice a few years back and was advised it was possible and indeed I took that advice, and set up the investments. I have gone a stage further though by transferring the PPP into a SIPP, markedly increasing monthly payments, spreading the investments more and going it alone. I am glad I am not the only one doing this!

jamesd

You're definitely not the only one, though the stereotype is that those on interest only are clueless paupers who've done no financial planning. We're a little different from that.

Loughton_Monkey

jamesd wrote: »

You're definitely not the only one, though the stereotype is that those on interest only are clueless paupers who've done no financial planning. We're a little different from that.

Agreed.

Personally, I have an Offset Mortgage. Wonderful things, providing great flexibility.

Until a couple of years ago, I had it more or less 100% 'Offset', often paying no interest; occasionally £1.21 or something.

Once I twigged that my rate was only 1% over base (1½%), I took it all out, and put it into 3.85% fixed rate bonds.

Strangely, I got a phone call out of the blue from the bank, with a very polite (what they called) "Routine review of progress", reminding me that I have to pay it off by the time I am 65, and they wanted to know if I need help 'getting on track'.

I gave them a very polite reassurance that I was 'on track' and that they could sleep well at nights.

Loughton_Monkey

jamesd wrote: »

If things turn out badly I, and probably you, would need to lengthen our retirement planning horizons, though it looks as though from a zero start I'll be at my basic (minimum) retirement planning target within seven years, since I'm almost there at 5.5 years. Few people would be willing to save and invest over 60% of their income to achieve the target as quickly, though, and most, including me, would ultimately want more than my minimal initial target.

I would certainly endorse this.

I retired early almost 5 years ago. I had a bag of different pensions, some savings, and mortgage-free house (well almost). My big proviso before I pressed the button to retire, was that my income must be enough to continue spending exactly what I consistently spent in work (including inflation provision etc.)

The safety margin I built in was (a) to ignore about £50K savings, (b) add a 5% spending allowance, and (c) to assume I need to support ourselves to age 90.

Given that my pensions pay less than 50% of my spending, (c) was by far a bigger safety margin than (a) - especially since longevity does not run in my family.

Now, after 5 years, I am extremely happy that I am 'ahead' overall. Very much a "swings and roundabouts" tale. On the one hand, House value, and my Equity ISA's are a little disappointing, but more than made up by far better Pension/Life Assurance payouts than I had imagined, plus routinely spending less. In fact my total "Balance Sheet" (which includes all cash, house value, and 'actuarial' value of pension funds) is 11% higher than when I retired.

Retirement gives you time to manage the investments better, and the removal of work stress is idyllic! My wife and I are starting to discuss if we should splash out a bit more on extra holidays.

So go for it boys!