Early-retirement wannabe

atush

But it won't always be better than a return from equities.

At today's rates, reducing a mtg isn't always the best idea (even if it has been in t he past).

petepool

atush wrote: »

But it won't always be better than a return from equities.

At today's rates, reducing a mtg isn't always the best idea (even if it has been in t he past).

Yes I agree but it should compare favourably to the savings and cash ISA options mentioned. I understand there's an argument that says you could use a cheap mortgage to buy equities as the yield on them might be higher but I felt more comfortable paying down the mortgage. Once I could see the end of that I started to invest in S&S ISAs..

mark55man

Just enough cash for emergencies
+
Just enough cash for short term savings goals

And not a penny more - long term money needs long term solutions (and I hardly ever mean property)

or, put another way

Roses are red
Interest rate rises are few
Stocks may be risky
But cash will always fall in value in a low interest environment where governments need to inflate away debts not caused by you

somethingcorporate

mark88man wrote: »

Roses are red
Interest rate rises are few
Stocks may be risky
But cash will always fall in value in a low interest environment where governments need to inflate away debts not caused by you

:rotfl:that's really catchy, have you considered a change of career?

kidmugsy

mark88man wrote: »

Just enough cash for emergencies
+
Just enough cash for short term savings goals

And not a penny more - long term money needs long term solutions (and I hardly ever mean property)

Each to his own, but I think that advice is bonkers. With what are you going to buy lots of shares when next their value plummets? How on earth can you gauge "just enough" (twice)? Investing in shares with no diversification is asking for trouble unless you are rich beyond the dreams of Croesus.

atush

Just enough is subjective. And you could always add a contingency.

Investing in shares with no diversification would be foolish.

But the above advice is to:

1, have a cash float/emergency/contingency, 2 have a home being paid off via mtg, and 3 invest into equities alongside 1/2 is not foolish but the very definition of diversification.

kidmugsy

atush wrote: »

1/2 is not foolish but the very definition of diversification.

No it isn't: "diversification" is usually used to refer to an investment portfolio, not to every asset you own. Would people really sell an owner-occupied house to rebalance an investment portfolio? Or to avoid selling equities when they need money but equities are languishing? Very few I'd think. Would people really buy equities with their emergency fund if equities tumbled? Surely not: that would defeat the purpose of an emergency fund.

atush

Sorry, for sophisticated investors that would be the case, but many here don't understand the totality of their assets (ie dont' consider owning their own property being 'in' property nor having a DC pension being in equities).

but at the MOST Basic level, you need cash, property, and investments in equities and other assets such as bonds in wrapped (first ie pensions and S&S isas) or unwrapped accounts.

KrytenIceCubeHead

Taking on board advice here, I've opened a stocks & shares ISA and put the remainder of my 2013/14 ISA allowance into it, the rest being already in a cash ISA. I'm going to close another account that holds a matured cash ISA (which has been tootling along at 1.8% PA...) and put that towards the 2014/15 allowance. Glad I enquired here when I did, just in time to not lose this years ISA allowance completely. Guess I'll be staring at e-tickertape a lot more now. Thanks again for the helpful advice.

mark55man

kidmugsy wrote: »

Each to his own, but I think that advice is bonkers. With what are you going to buy lots of shares when next their value plummets? How on earth can you gauge "just enough" (twice)? Investing in shares with no diversification is asking for trouble unless you are rich beyond the dreams of Croesus.

Kidmugsy - you are right and I was unclear


Really I meant put aside cash for emergencies (opinion divided on the size of this, with more conservative working people going as far as 6 month, but for me 1-2 has proven enough), + anything you know you need to by short term - eg car.


The rest put into your investment portfolio, which will have its blend of assets including cash as part of a considered portfolio. Now personally I think that cash held in 3 is separate from 1 and 2, as you wouldn't plunge your emergency fund into the market when it had halved given what that implies for the economy. However that said, my cash held in 3. is pretty much 0 - ie my policy is to be pretty much fully invested as keeping cash is timing the market, and I would rather be in it than out of it. Part of this (see below) is that I am quite risky in my DC Pension and ISA Portfolio as its all for later and I regard my DB as my safe assets.


FYI my ratios by total assets
- Emergency Fund = 1%
- Short term savings = 1%
- House (net value - mortgage) = 30%
- DC Pension = 18% (Mainly equities)
- DB Benefit (using x20 last estimate) = 50% of assets


(I regard my DB Benefit as more than enough conservative / bonds / fixed income - on others have suggested I should subtract it from my target income and then create a balanced portfolio aiming at the gap - I disagree although the overall opinion on a thread asking that question was mixed


So I think I am balanced. My early retirement plans will largely depend on more personal / health related matters in the family, but think I have a good basis on which to build