Share allocation - opinions welcome

avina

Hi All,

I would welcome some view on the following asset allocation. I am no expert when it comes to this sort of stuff so want something passive over the short-medium term (8-10 years). No particular aim in mind apart from putting away spare cash in S&S ISA rather than a saving account. Looking at around £700 pcm drip feed as follows:

Woodford: 45%
Vanguard LifeStrategy80: 45%
Vanguard Emerging Markets: 10%

Does the above seem too simple? What am I missing?

Generali

Does the strategy include bond investments? A rule of thumb is 60:40, equity:debt.

avina

Generali wrote: »

Does the strategy include bond investments? A rule of thumb is 60:40, equity:debt.

Hi Generali - 20% of the vanguard lifestrategy is bonds which would work out at 9% overall.

Radiantsoul

It is likely to be quite a bumpy ride, but it depends on how happy you are with that really.

avina

Radiantsoul wrote: »

It is likely to be quite a bumpy ride, but it depends on how happy you are with that really.

Due to being so light on bonds? I appreciate that and nothing is set in stone so could change to lifestrategy40 which would give me about 27% bond coverage. Although a bumpy ride is not something I'm particularly adverse to.

AlanP_2

8-10 years is a reasonable timescale to be working on, suggested minimum is 5 years for S&S investments from what I have picked up.

What is the endpoint though? Is this a retirement pot that you will start converting into cash over a period of years from say 2024, or for a one-off withdrawal to fund something specific?

How are you as regards accessible cash in case of unexpected events - You don't want to be in a position of being a "forced seller" at the bottom of a market dip.

How old are you, what pension arrangements do you have in place, situation as regards mortgage, dependants etc?

All of these are best considered as you plan your approach rather than when you have committed a fair bit of cash to something.

We have just started a private pension that we will start to make use of in a similar timescale, although we both have good employer Defined Benefit schemes so it won't be our only resources and have gone:

85% VG LS80
7% VG EM
8% VG Dev Europe ex UK

Thinking there was these are going to be slow and steady growth pots hopefully and as we won't have a "hard date" date for using them to fund retirement we can time any sales.

If we were more reliant on this pot the bond side would certainly be higher and we would move away from equities as we got closer to the day.

In addition we will be setting up a drip feed into a S&S ISA that will contain individual funds (some passive and some active) with no Bonds that will be even more volatile but gives us the flexibility to take as much out as we like, when we like with no tax to pay (to help children with house deposits and the like or something more frivolous).

Ryan_Futuristics

I think it's a deceptively good asset allocation ... You've kept fees down; you've got a decent chunk in the UK (about the most attractive market there is at the moment on a balanced perspective), benefits from both active and passive management (both of which suit slightly different market conditions, and suit a modern perspective that both should be employed in portfolios)

Re: bonds

Be very careful (everyone here) buying or holding bonds at the moment ... They've played a stable, reliable role in portfolios for a long time, but with interest rates so low: a) they don't provide the diversification benefits; b) the yield is often negative in real terms; and c) when interest rates rise, they are very likely to lose value

No one can say for certain what's going to happen with bonds, but when you consider they're supposed to be the less risky part of a portfolio ... well, the risk in holding them is substantial ... Over 5-10 years they could easily lose value

What it comes down to is they're very expensive, and they yield very low ... Rarely a good combination ... The same could be said of US equities (which feature highly in the LS fund) ... Well from my perspective: at least you've got the Woodford fund if there's a big correction in bonds and US equities ... People over 50% Vanguard LS - well the markets may continue to favour you, but there is significant downside there you should be aware of

InvestInPoker

avina wrote: »

Does the above seem too simple? What am I missing?

Looks good to me, you could add some property via the blackrock global property tracker or an allocation to smaller companies via the vanguard small cap global index tracker but that is up to you.

jimjames

Generali wrote: »

Does the strategy include bond investments? A rule of thumb is 60:40, equity:debt.

Not sure where this rule of thumb comes from, it's not something I've ever used.

Drp8713

jimjames wrote: »

Not sure where this rule of thumb comes from, it's not something I've ever used.

I agree, I hold 0% in bonds, although i do have a longer investing time frame.

Although I am more likely to buy during a crash than sell, so unless you are at the preservation stage of things, I guess they are only there to reduce volitility for people worried about it.

My only non equities are 5% direct propery, 5% infrastructure and 5% precious metals, but that is more for diversification than anything else.

jimjames

Drp8713 wrote: »

I agree, I hold 0% in bonds, although i do have a longer investing time frame.

Although I am more likely to buy during a crash than sell, so unless you are at the preservation stage of things, I guess they are only there to reduce volitility for people worried about it.

Same here although my bond allocation has increased over the last few years and is now about 2%. Ive still got 20+ years of investing ahead so prepared to be very high equities.