How do i calculate the diversification of my investment portfolio?

redpete

Abatement wrote: »

So how do i put those things together? In particular, does my level of cash include my mortgage (i.e. do i have a negative cash holding, in effect, of -£125k?) on the basis that both the savings and the mortgage are exposed to (say) inflation?

And should I include my pension holdings in with the index trackers? Or exclude them on the basis that i won't be able to access them for 30-odd years?

And do I count my house as a £650k exposure to 'property', or ignore is as I'm actually living there?

I'm sure this shouldn't be so difficult...

I've separated investments that are part of a pension from investments that I might use for other purposes. The reasons are that the investment time-scale is different for the two (or could be) and my appetite for risk might be different for the two 'pots'.

I've not included the value of my house nor the mortgage - I don't consider the equity in my house to be at all liquid - I will always need somewhere to live.

This leaves the funds and cash. You could decide to keep the cash separate and exclude from the calculations, or maybe as you get closer to retirement use it as part of the low risk part of your pension provision. Then it's just a matter of using trustnet or similar to get the spread of holdings in each fund (e.g. analysis of equities by region and amount held in property / bonds / cash or equivalent). Divide down to whatever level you are interested in and/or whatever level you can get information in (e.g. for me I'm not as interested in the difference between Far East, Japan, Emerging Asia and have lumped them all together, similarly I haven't differentiuated between corporate bonds and gilts nor have I looked carefully into the geographical spread of bonds/gilts).

So for me I manage my pensions to be approx 25% UK eq, 17.5% North Am eq, 15% Europe eq, 12.5% Far East eq, 20% bonds/gilts and 10% property. I'll make sure that there is some split in e.g. Far East (so e.g. not all in Japan equities) but not to any particular percentages.

kangoora

I've always calculated in 'some' equity in my home as part of retirement planning as I know that at some time I'll downsize from our current 4 bed house when the kids have flown the nest.

I've just put a nominal £100k additional capital into my spreadsheet roughly 5 years after No. 2 son is due to finish Uni (assuming he goes to Uni).

Abatement

redpete wrote: »

I've separated investments that are part of a pension from investments that I might use for other purposes. The reasons are that the investment time-scale is different for the two (or could be) and my appetite for risk might be different for the two 'pots'.

I've not included the value of my house nor the mortgage - I don't consider the equity in my house to be at all liquid - I will always need somewhere to live.

I can see the logic in that certainly. But it does give rise to some arbitrariness, e.g. if I have 10k sitting in a savings account and decide to use it to overpay my mortgage (because, say, the interest rate on the mortgage is higher than the net rate on the savings account), it would then be ignored and make it look like I was relatively more 'exposed' to the equities bit of my portfolio.