Portfolio for SIPP Flexible Drawdown

dunstonh

I've seen many comments on this forum recently about the FTSE having not been a very good investment over the past 10 years, some implying it therefore is not a good place to invest.

I think the FTSE is a great place to invest because it has performed so poorly over the past 10 years. It now offers good value.

The issue is not about equities but about potential. Historically, the UK stockmarket does poorly under a Labour Govt. It hasnt improved under the ConLibs. That maybe due to early days or the fact the Libs are holding Cons back in the areas the market likes. It could be totally fluke too. It is more about future potential of the UK for real capital growth compared to other markets?

If you invest 100% into UK equity then you are effectively saying that you think the UK is the best place in the world to invest. Do you really think that?

Here is the ranking out of 22 major worldwide plus the FTSE100.

Last Month 2.0% Rank: 21 out of 23
Last Year -3.1% Rank: 15 out of 23
Last 5 Years -9.6% Rank: 18 out of 23
Last 10 Years 10.8% Rank: 19 out of 23

middlepuss

dunstonh wrote: »

If you invest 100% into UK equity then you are effectively saying that you think the UK is the best place in the world to invest. Do you really think that?

Here is the ranking out of 22 major worldwide plus the FTSE100.

Last Month 2.0% Rank: 21 out of 23
Last Year -3.1% Rank: 15 out of 23
Last 5 Years -9.6% Rank: 18 out of 23
Last 10 Years 10.8% Rank: 19 out of 23

I would not recommend investing 100% in a FTSE All Share tracker.

The point I am making is that many people, now including you, have looked back over the past 5 or 10 years, over which the UK market has not done particularly well, and used that to back their implied assertion that the UK will therefore not do very well in the future.

I happen to think the UK will do much better relative to other markets over the next 5 to 10 years than it has over the past 5 to 10 years.

But, as I have said in many other posts, I would always suggest a mix of UK and other markets, particularly emerging markets.

dunstonh

The point I am making is that many people, now including you, have looked back over the past 5 or 10 years, over which the UK market has not done particularly well, and used that to back their implied assertion that the UK will therefore not do very well in the future.

I havent said that history means it will be bad going forward. The issue is that does the UK offer the potential to be the best going forward. You expect underperfromance during a Labour Govt (no rule says their will be but historically that is the case). We dont have that now. So, it may improve. But improve enough to have a 100% or near 100% weighting?

But, as I have said in many other posts, I would always suggest a mix of UK and other markets, particularly emerging markets.

Yes you have and I accept that. The point is not really aimed at you specifically.

gadgetmind

middlepuss wrote: »

I happen to think the UK will do much better relative to other markets over the next 5 to 10 years than it has over the past 5 to 10 years.

1) Why?
2) So how much would you overweight the FTSE, and how would you balance this between 100, 250, all share, and income?

I am interested, as I am over-weight in all of the above, so would like to see the rationale of others.

Loughton_Monkey

Personally, I think you should use the term "Risk" very carefully.

To exaggerate, but illustrate what I mean, look at two extremes:

1. Mrs Muffit at number 22 is 75 years old, with barely enough pension to keep her food and bills paid. She has £10,000 - her only assets - saved for a rainy day, all invested in RBS Shares. Her risk? I would say an untenable and stupid risk personally.

2. Fred Goodwin has £3 million a year from his company pension, and £20 million in property, funds, and a huge range of assets. This includes £10,000 in RBS Shares. His risk from having £10,000 in RBS shares? Negligible!

So it has a lot more to do with your other assets.

Perhaps in a similar position, I too have around £100K in pensions which I will eventually put into flexible drawdown. With many-fold that amount in final salary schemes (in payment), property, and ultra-safe cash-based investments, I am invested in funds that some would advise as 'too risky' for a 62-year-old. I tend to have 'weight' into areas (Asia, Natural Resources, China etc.) which I firmly believe will provide growth far, far greater than the 'dead' economies of Europe/USA. Yes! I appreciate the 'risk' that I have judged this wrongly. I could conceivably lose the whole lot! But if I did, I would simply take the hit, and maybe convert to Sainsbury's own brand gin & tonic, but it wouldn't be a drastic influence on my lifestyle.

Linton

middlepuss wrote: »

I've seen many comments on this forum recently about the FTSE having not been a very good investment over the past 10 years, some implying it therefore is not a good place to invest.

I think the FTSE is a great place to invest because it has performed so poorly over the past 10 years. It now offers good value.

If this is your view then I believe it would be sensible for you to invest relatively strongly in FTSE shares, probably in a FTSE tracker. You would have made a strategic decision and acted rationally on it. My real concern is with newby investors putting their £100 a month into a FTSE tracker because they understand it to be the safe, vanillla and good value option.

middlepuss

gadgetmind wrote: »

1) Why?
2) So how much would you overweight the FTSE, and how would you balance this between 100, 250, all share, and income?

I am interested, as I am over-weight in all of the above, so would like to see the rationale of others.

I wouldn't presume to advise on weightings.

My opinion that the UK won't do as badly as it has over the last 5 years is not the same as saying it will be the best performing market in the world, as dunstonh seems to infer.

Personally I have a mix of FTSE All Share trackers, large global investment trusts and emerging market ITs and UTs.

I don't think the UK will do as badly (relative to other markets) in the next 5 years as it has in the last 5 years because the underperformance caused by the financial sector is now behind us, UK companies have slimmed down their operations and are arguably leaner and fitter, UK companies have strengthened their balance sheets, and many UK companies are exposed to emerging markets - eg miners, Tesco, Unilever. And the P/E of the UK market is now at a quite reasonable level - I don't think many would argue that the UK market is currently overvalued.

Loughton_Monkey

The problem with UK is that the number of profitable British Companies will no doubt decline. You would probably have been 'sectioned' in an asylum had you uttered - 20 years ago - that Land Rover, Jaguar, British Steel [Corus] would all be taken over by Indian companies.

On the one hand, it's good to see Unilever, Tesco etc. become 'International'. But such ready made companies will doubtless be bought by China out of petty cash before too long.

The prognosis for "UK Ltd." cannot be good for the forseeable future. Any recent so-called wealth creation came from short term tactics such as outsourcing to cheaper labour (while protecting brand values) and paying ourselves more than we truly earn (credit). I think the game's up, and we are firmly heading [albeit quite slowly] into third world status. A slow attrition, but not one I am comfortable investing in for the longer term.

gadgetmind

middlepuss wrote: »

many UK companies are exposed to emerging markets - eg miners, Tesco, Unilever. And the P/E of the UK market is now at a quite reasonable level - I don't think many would argue that the UK market is currently overvalued.

I did a fair bit of buying during the late summer and autumn, and I was looking for oversold UK companies with strong balance sheets, good dividends and cover, and good overseas exposure.

I have many of the usual suspects, but also the likes of Diageo and Compass, and smaller companies such as WS Atkins. I'm over 50% up on capital on ATK and have a very well covered yield on purchase price of 6% to look forward to.

Even so, 80% of my holdings are outside of the UK, as I really don't think the UK is anything special.

Linton

I do believe that the UK does have a reasonable economic future and dont share Loughton's pessimism. However I do not believe that its future is encapsulated in the performance of the FTSE100 and therefore in the FTSE Allshare (80% IIRC of which is the FTSE100). The FTSE100 component structure is very far from being representative of industry and commerce in the UK, and indeed includes several companies with little connection to the UK at all.

So, apparently like Gadget, I believe that the UK is a market where specific opportunities must be sought.

In line with this, my UK growth investments are in Small Companies (apart from M&G Recovery which has served me well over the years) where I believe the future of the UK will become apparent, and in dividend paying shares for income rather than capital growth. Neither of these sectors have been shown to be appropriate for tracker-style investing based purely on market capitalisation.