Take a peek at my hand?

Prism

Ray_Singh-Blue said:

Update #26 Q2 2021

So, in summary, the way I view my target asset allocation is:

Stocks, 25%;

Cash, 25%;

Physical assets and gold, 25%;  (I have no gold)

Pension and bonds, 25%; (I have no bonds)

Does that make any kind of sense?

I would be interested to know what you feel about this. In particular any criticisms. Do I have any blind spots? It may feel dull and risk averse to some people? But as I enter my late 40s, I feel at peace with being a little dull and risk averse. It seems to be helping me sleep well at night.

Yes it does make sense to me. Outside of my SIPP, which is all equities, I follow a similar allocation but with different percentages to you. 

Global equities 25%
Domestic equities 25%
Physical assets 25%
Cash and bonds 25%

At least those are my target allocations - I am not quite there yet but not in any particular rush to get them exactly right. The physical assets part is split between property, infrastructure, green energy and a touch of gold.

Eco_Miser

Ray_Singh-Blue said:

Update #26 Q2 2021

4. Bonds

Bonds tend to hold value and provide a known income or yield. Well, I have a pension to look forward too one day, if I make it that far. This will provide steady income, much like the yield on a bond fund.

If my pension was worth less than 25% of my total assets, I'd top up this basket with bonds. But depending on how you value it, that's probably not the case.

 

So, in summary, the way I view my target asset allocation is:

Stocks, 25%;

Cash, 25%;

Physical assets and gold, 25%;  (I have no gold)

Pension and bonds, 25%; (I have no bonds)

Does that make any kind of sense?

Yes, but what kind of pension do you have?

The state pension is very much like an inflation linked gilt, and a DB pension like investment grade bonds, but a DC pension is just a tax wrapper for whatever is inside it, which could be 100% equities, 100% bonds, property, cash, or any mix thereof.

So if you have a DC pension, eg a SIPP, it is not a substitute for bonds.

Ray_Singh-Blue

Update #27, Q3 2021

Hey, wow, thanks for all those responses. Love the questions & will always try to answer.

Type_45 said:

You should have your own blog similar to Monevator's! Very entertaining, interesting and well written thread 👍

Gee thanks. Hope it's of some passing interest and entertainment, as long as the entertainment does not involve me going bust. But really I don't think my random musings are worthy of that. What I really value about being able to post here is the feedback and ideas. 

MX5huggy said:

I find the Tesla thing interesting, if you had cashed in say 50% of your holding to take your profit and then let the rest run as a no cost bet, if I ever was in this position I think I might do this.

I know what you mean, but... at what point do you take half your chips off the table? If you have the conviction to take half the chips off, do you also have the conviction to leave another half on?

Anyway, I am not planning to play that game any time soon. But will happily read of your adventures...

PaulGBO said:

Why have you got Tesco in the first place? The US stock market is where the money is.

I bought Tesco in the first place because I was a chump.

I sold them when I realised I didn't really know that much about the world of supermarkets. Not as much as people who's job it is to know that stuff. Analysts, pension funds, hedge funds and so on. This realisation gradually led me to index funds, where I now happily park 100% of the "equities" part of my investments.

Your second statement is really interesting. Now don't quote me on this, but it looks like the US stock market accounted for 56% of the world's stock market capitalisaton as of August 2021. So one one level I tend to agree with you. It is where a lot of the world's money is. However... have you seen this infographic ? 

If I have it right, world stock markets are worth about $90 Trillion, which is certainly a lot of money. But it's not all the money. Global real estate is worth even more. Stock markets make up only about a quarter of global wealth, which is around $360 trillion.

Additionally derivatives, which I don't pretend to understand, have a notional value of up to $1 quadrillion. Well that sure sounds like a lot. I wouldn't know a quadrillion if it came up and bit me where the sun seldom shines.

So, I'm currently feeling at peace with my target of 25% equities, 25% property, 25% cash, 25% bonds. (Caveat- not 100% at peace- see below).

To some people 25% it may seem low, but on the other hand does appear to be in balance with how the world allocates its money.

Prism said:

some sensible stuff

Prism - thumbs up to your thinking

Eco_Miser said:

What kind of pension do you have?

Eco_Miser, it's a defined benefit pension which I expect to pay me an OK amount in about 20 years time, index linked. Mrs Ray has a smaller defined benefit pension. They will be nice to have but I do not wish to rely on them alone. In particular I am looking at current investments being a way of funding earlier retirement.

***

So, thanks again for those comments and questions. Here's Update #27. It's a bit early, but I too have a question to ask.

Global stock markets have had a great year so far. The S&P500, for example, is up 30%. As our result, and with a little extra investment in, our ISAs are now looking substantially healthier than a year or two ago.

In fact, about two years or so the balance first reached break-even point with the mortgage. It back slid a little in the early days of the pandemic, but now sits comfortably ahead again:

Mortgage £247K
ISAs £373K

The ISAs are currently set up like this:

VWRL 51%
Cash 43% and ...
(cough) Gold 5% (cough)

Er, yes, gold. I wrestled with buying the yellow stuff. With a target allocation of 50% stocks and 50% cash, the stocks needed pruning. But cash does not look super -appealing right now.

Inflation is at 3% or quite possibly more, if you ask my gas supplier or the woman who cuts Mrs Ray's hair. While interest rates are creeping along the floor like a caterpillar hiding from a bird.

That means cash buys less every day. Now on one hand, I don't mind that because our mortgage can be measured by the same yardstick. But on the other hand, there may be other places to store value better (or worse).

So after a bit of umm-ing and ah-ing,  I whacked it in gold. Boom. WisdomTree Physical Gold (PHGP). After my less than glittering experience with Aluminium a few years ago, I can't help wondering if I have been stupid. At the very least I have contradicted my written asset allocation plan outlined in the last post.

Still, let's see how it goes.

***

And here's the question:

We now have 4 accounts on the go. Two S&S ISAs, and two cash ISAs. Each account is now pushing the limits of the Financial Services Compensation Scheme, which I understand guarantees compensation up to £85,000 if a firm fails. In fact one account has over £110K in it.

How do more seasoned veterans handle this? Should I open more accounts and keep the balance of each below £85K?

Really I would like to keep things as simple as possible, but as a DIY amateur I am unsure if this is the way go. I spent an enlightening evening reading the "SVS Securities" thread recently, and it put the wind up me. Thanks for any advice on this point.

All the best,

Ray

Thrugelmir

"Global stock markets have had a great year so far. The S&P500, for example, is up 30%. As our result, and with a little extra investment in, our ISAs are now looking substantially healthier than a year or two ago."

If you held all the stocks in the S&P in equal %. Then the rise over the past 12 months would only be 5%.  

aroominyork

Thrugelmir said:

If you held all the stocks in the S&P in equal %. Then the rise over the past 12 months would only be 5%.  

I don't understand that comment. x-trackers has an equal weight S&P 500 ETF (XDWE, yellow in the graph) which, in theory, holds 0.2% in each company. It has risen more than 30% over the last year, outperforming the cap weighted index. (I think neither are hedged.)

Eco_Miser

Ray_Singh-Blue said:

Update #27, Q3 2021



And here's the question:

We now have 4 accounts on the go. Two S&S ISAs, and two cash ISAs. Each account is now pushing the limits of the Financial Services Compensation Scheme, which I understand guarantees compensation up to £85,000 if a firm fails. In fact one account has over £110K in it.

How do more seasoned veterans handle this? Should I open more accounts and keep the balance of each below £85K?

Really I would like to keep things as simple as possible, but as a DIY amateur I am unsure if this is the way go. I spent an enlightening evening reading the "SVS Securities" thread recently, and it put the wind up me. Thanks for any advice on this point.

All the best,

Ray

The SVS saga wasn't helped by the transfer to an apparently incompetent broker. However you should have noticed that all the holders of conventional investments got their stocks back eventually, and the FSCS paid the administrators' fees (unless an individual's share of the fees exceeded the £85k guaranteed).

I've got over £200k with Iweb, and no sleepless nights or plans to move some. If it got to £800k (it won't) I might rethink.

Alexland

Ray_Singh-Blue said:

We now have 4 accounts on the go. Two S&S ISAs, and two cash ISAs. Each account is now pushing the limits of the Financial Services Compensation Scheme, which I understand guarantees compensation up to £85,000 if a firm fails. In fact one account has over £110K in it.

How do more seasoned veterans handle this? Should I open more accounts and keep the balance of each below £85K?

On the Cash ISAs then the money is all mixed up with the health of the institution so I would have a plan to get back under the £85k again. The whole point of cash savings is to be safe and with current interest rates you are certainly not being paid a risk premium to take on single company failure risk.

On the S&S ISAs then provided you have a good spread of your assets across unrelated platforms and they are with big name reputable players then I would personally just let them grow plenty above the limit as the asset should be correctly segregated from the platform business and even though SVS took ages with lots of pain the normal investments were successfully recovered.

My biggest single investment is over £400k in a Vanguard ETF and although it worries me a bit, in recent years I have been working on building up investments elsewhere to help balance it out, although recently it's been growing faster than I can contribute elsewhere which is a nice problem to have. Maybe a sustained market crash might help get some balance as I still have around a decade of contributions to make before I can retire early.

Thrugelmir

Eco_Miser said:

Ray_Singh-Blue said:

Update #27, Q3 2021



And here's the question:

We now have 4 accounts on the go. Two S&S ISAs, and two cash ISAs. Each account is now pushing the limits of the Financial Services Compensation Scheme, which I understand guarantees compensation up to £85,000 if a firm fails. In fact one account has over £110K in it.

How do more seasoned veterans handle this? Should I open more accounts and keep the balance of each below £85K?

Really I would like to keep things as simple as possible, but as a DIY amateur I am unsure if this is the way go. I spent an enlightening evening reading the "SVS Securities" thread recently, and it put the wind up me. Thanks for any advice on this point.

All the best,

Ray

The SVS saga wasn't helped by the transfer to an apparently incompetent broker.

The only broker who was interested. 

Ray_Singh-Blue

Update #28 , Q4 2021

A final post. I think this thread has now finally run its course. There's nothing new to say really.

I don't think about investment much these days. Which is a win. It's nice to know that it's pretty much on auto. I could use the fruits of the last 7 years to pay off the mortgage, take a break from work for a while, buy my next house - the sort of stuff. If the boiler or the car break down or the roof starts leaking, it's covered.

The value of ISAs is now £394K, which is over £150K more than the remaining mortgage. They consist of a cap-weighted global equities passive tracker (51%)  and cash (41%) and a gold ETF (8%). Never going to be Elon Musk this way, but that's OK.

Farewell, & a happy onward journey. Hope you arrive at your destination in good time.

Ray.

Ray_Singh-Blue

Update #29, Q1 2022

It seems that every time I try to leave this thread, something happens. A pandemic maybe, or a war. So I figured, maybe keep it going in the interests of global stability. 

As mentioned previously, over time I am veering towards a type of Permament Portfolio, as described by Harry Browne in his 1999 book "Failsafe Investing - lifelong financial security in 30 minutes". This is still the best thing I have read about investing, or at least, the thing I can most easily get behind and get stuck into.

The basic idea is to have equal amounts of stocks, gold, cash and bonds to provide some security in all economic situations. The last few months have offered the first real test of my rough implementation of a portfolio that is starting to look a little like that. Global markets dropped this Spring. Not a massive amount- about 10% between January and March- and they have recovered about half of that at the time of writing. Gold kind of did the opposite, gaining about 10%. It was interesting to see the smoothing effect a modest allocation to gold had on the whole portfolio.

The ISAs now look like this:

Stocks 52%: £208K of VWRL, and £5K of shares in the pharma company Novartis (I know, I know...).
Gold 8%: £35K of a gold ETF
Cash 40%: £164K
Total: £412K

Bonds are the one asset class missing from Harry Browne's recipe. Rightly or wrongly, I think bond funds will have more value to lose as interest rates rise. Actually I have thought this for years, and been proved wrong year after year - but it does actually appear to be happening now. The bond ETF VGOV is the one I keep an eye on. It's down about 20% since May 2020 and current trading at the same price as it was in January 2015. At some point I will make the call and start getting into bond funds, but right now I feel they have more downside than cash, and am keeping that powder dry.

Regards,

Ray.