Safe haven in troubled financial times

nearleyretired

Does anyone have a take on the level of risk that investments should be at in these troubled financial times?

We have ours at say 3 or 4

---

on a 1 to 10 scale

(safe as houses to very risky)

We see the troubles of the Euro Zone looming and are thinking of ratcheting back to say 1 or 2 for a while. We are with an IFA so will be talking to him as well.

atush

The problem with moving out of equities after a fall is that you 1- Lock in Losses and 2- will miss the upturn when it comes.

For what it is worth, I buy when prices fall rather than sell. And I contribute monthly to saving into equities rather than lump sums apart from my smallish share portfolio. This means you get Pound Cost Averaging which helps protect you from market volatility.

qpop

atush wrote: »

The problem with moving out of equities after a fall is that you 1- Lock in Losses and 2- will miss the upturn when it comes.

For what it is worth, I buy when prices fall rather than sell. And I contribute monthly to saving into equities rather than lump sums apart from my smallish share portfolio. This means you get Pound Cost Averaging which helps protect you from market volatility.

This.

Why is it that human nature is intent on making us lose money?

atush

I have no idea, but people panic and those are the people who sell and get left out of every recovery.

gadgetmind

qpop wrote: »

Why is it that human nature is intent on making us lose money?

Buffet said that while investing is simple, it isn't easy.

I've been moving bonds and cash into equities right over the summer and am even increasing this rate. The real risk right now IMO is in the bubble we're seeing in bonds and gilts as equities have close to worst case built in as shown by the massive dividend yields we're seeing.

All the usual advice suggests that I should be 40-50% in fixed interest, yet I'm heading towards 10%, albeit with a buffer of cash and ILSCs.

Of course, if I was closer to retirement (7 years for me), and was going to use an annuity, my approach might be different.

Ark_Welder

gadgetmind wrote: »

All the usual advice suggests that I should be 40-50% in fixed interest, yet I'm heading towards 10%, albeit with a buffer of cash and ILSCs.

What always intrigues me about the 'percentage of bonds to age' advice is that it doesn't mention what types of bonds - which I assume to mean high-grade conventionals - nor does it allow for other asset types, such as property and private equity. I can only imagine that there form part of the 'equities' allocation...

Ditto here for the suggested range, but my bond allocation is currently just a touch above 30%. Almost half of those are index-linked, though, and a proportion will be floating-rate and so the coupons will increase when interest rates start to rise (assuming that the undelying companies don't go bust in the meantime!). Don't have a percentage for those, meaning that I've just discovered a spreadsheet-enhacement requirement...


But back to the OP. Investment risk can depend upon your timescales, and might be determined by how 'nearly retired' you are. If you are within 5 years or so of drawing an income from your assets then gradually reducing holdings in volatile assets might be a sensible approach. By how much would depend upon your current asset allocations. But if you are thinking of 'ratcheting back for a while' before going back in, then you are probably better off staying as you are.

gadgetmind

Ark_Welder wrote: »

nor does it allow for other asset types, such as property and private equity. I can only imagine that there form part of the 'equities' allocation...

For fixed interest, I'm tending towards index linked gilts and corporate bonds, but no big %age of either. For property, I feel well exposed to private, but am tempted to put 5% in HICL/INPP/3IN, but even these are looking toppy.

I also hold infrastructure and private equity in ISAs, so won't miss out on income/growth of these, though won't be able to benefit from rebalancing.

Every safe harbour seems to be jammed with boats, and the papers are plastered with recommendation for which harbour is serving the best wine, which is perhaps the best indication we have that safety is over-sold and the most volatile assets classes might be the safest.

I'm going to continue selling property and fixed interest and moving into global equity, EM, pacific, smaller companies, and UK high income. Wish me luck as I might need it!

Linton

gadgetmind wrote: »

Buffet said that while investing is simple, it isn't easy.

I've been moving bonds and cash into equities right over the summer and am even increasing this rate. The real risk right now IMO is in the bubble we're seeing in bonds and gilts as equities have close to worst case built in as shown by the massive dividend yields we're seeing.

All the usual advice suggests that I should be 40-50% in fixed interest, yet I'm heading towards 10%, albeit with a buffer of cash and ILSCs.

Of course, if I was closer to retirement (7 years for me), and was going to use an annuity, my approach might be different.

I believe you should regard your buffer of cash and ILSCs as part of your investment portfolio - how do things look if you do? Under current circumstances those assets seem preferable to low risk bonds.

nearleyretired

... I should have said that I have been retired for 2 years now.....

gadgetmind

nearleyretired wrote: »

... I should have said that I have been retired for 2 years now.....

In drawdown?

I'm also a drawdown kind of person (subject to rule changes etc. over the next few years) but plan to remain heavily in equities alongside three years of essential income in NS&I certs and various cash accounts. The latter are because NS&I are a bit on-and-off lately, and I' d rather raid the cash than certs that I don't know when I can re-acquire.

gadgetmind

Linton wrote: »

I believe you should regard your buffer of cash and ILSCs as part of your investment portfolio - how do things look if you do? Under current circumstances those assets seem preferable to low risk bonds.

I do regard my cash and certs as part of my overall portfolio *but* with neither SIPPs nor ISAs can I use my cash/certs to rebalance as there are complex rules on payments into a SIPP, no way to withdraw from one, and ISAs have rules of their own. So yes, it's part of my portfolio, but I also feel a strong need for diversity within my individual pension and ISA pots.