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Balancing a portfolio

Mirador
Posts: 58 Forumite
The last time I used an IFA, the asset allocation for a Balanced investor which I followed was as follows. Portfolio value £150000.
Proposed 2010 Actual 2014
Fixed Interest 27%. 25%
Property 24% 17%
European equity 5% 3%
UK equity 25% 25%
US equity 16%. 19%
Far East equity 3%. 4%
Other holdings. 7%
I intend to move in to drawdown shortly and I understand that the advice has been to move assets into more low risk options when approaching retirement. However my intention is to take the TFLS and drawdown an amount equivalent to the personal allowance for 4 years until my final salary pension will commence. At that point, I am unlikely to need further drawdown. So these funds could remain invested over a number of years.
So my question to the experts is does the above allocation seem reasonable or do I need to consider changing the balance, given the above situation.
Proposed 2010 Actual 2014
Fixed Interest 27%. 25%
Property 24% 17%
European equity 5% 3%
UK equity 25% 25%
US equity 16%. 19%
Far East equity 3%. 4%
Other holdings. 7%
I intend to move in to drawdown shortly and I understand that the advice has been to move assets into more low risk options when approaching retirement. However my intention is to take the TFLS and drawdown an amount equivalent to the personal allowance for 4 years until my final salary pension will commence. At that point, I am unlikely to need further drawdown. So these funds could remain invested over a number of years.
So my question to the experts is does the above allocation seem reasonable or do I need to consider changing the balance, given the above situation.
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Comments
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Given what you say, you have enough fixed interest (about £62.5k) to cover the £40k you want to take out, so you would seem to be well covered. Each year, you can work out how much you'd need in each asset class if the portfolio were £10k smaller, buy and sell as appropriate, and then take the now surplus cash.
Even if equities have a huge crash, you'll just end up mainly taking cash from bonds, but also doing some rebalancing to be (mostly) a buyer of equities.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
The property % seems remarkably high. What was the objective? If you are investing for the longer term once you have taken the TFLS I think you could reasonably move most of it to equity: more in Europe and Far East perhaps.
The advice to move assets into low risk options when approaching retirement is only really applicable if you are planning to buy an annuity immediately and therefore cannot afford a short term drop in value.0 -
IFA created portfolios often seem to feature lots of commercial property. Mine was at 30% before I went DIY.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
On the question of the TFLS are you suggesting that I should consider just liquidating the bond element of my portfolio. I had intended to pro rata everything and keep the same balance and hadn't considered any other option, so thank you for highlighting this.0
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I had intended to pro rata everything and keep the same balance
Let's just say that opinions differ regards this. Key for me was seeing enough fixed interest to cover you if there is a huge equity drop in year 1 (worst nightmare!) and that this would let you rebalance by buying equities rather than having to sell them.
I suspect that if this did happen, you'd be *very* cautious regards selling down all of your bonds and would be happier hanging onto them by (effectively) increasing your allocation.
OTOH, if nothing drastic happens, then the approach you outlined makes perfect sense.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0
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