Asset allocation review.

Zippeh

Id like a second opinion on my potential asset allocation. I havent yet decided which funds to use. This will be for my pension fund. Im 34 and plan to retire at 60ish. My pot is currently £12000 and ill be paying £500 gross a month.

Global Corporate 4.17%
UK Inflation Linked 4.17%
Property 8.33%
UK Tracker 25.00%
US Tracker 33.33%
Europe Ex UK 16.67%
Global Small Cap 8.33%
Asia tracker ex japan 8.33

How does this look?

Drp8713

Any reason for missing out on Japan & Emerging Markets?


Also your percentage totals 108.33%

dunstonh

Is that the sector allocation or the asset allocation? (i.e. is it an Asia pacific fund at 8.33% or are the underlying assets giving you 8.33%)

I think you are looking at sector allocation from your wording which would mean you are missing a number of sectors (emerging markets, japan, UK corp bond).

How does the volatility rating fit with your profile?
Why so heavy on US?

Mistermeaner

Possibly need specific small cap funds in each main region (US, uk, eu). Personally I would have 5% small caps in each (total 15)

I'm assuming your US includes Canada?

Some might say your US light but I think that's ok on present value basis.

Your uk heavy but again no issue with domestic bias

Is your property direct or property companies? Also how globally diverse?

What is uk inflation linked? Is that gilts? Maybe ditch that with time scales.

Is Asia include Pacific (eg oz)

Emerging markets is missing (or is that in global?) What about India China south America?

That global seems low and Wierd, what is in there?

Perhaps just an idea but split your pot 50:50, half allocated out as you have (kind of passive) half into a globaldiverse managed fund.

Zippeh

Oops i missed a column on my SUM function! Yes my percentages are out!

Ive been reading Smarter Investing and im trying to apply the lessons in that to real world allocations. The US one is heavy as thats the largest market and it gives me propotional access to that. The two two top ones are bonds for my defensive part.

As i said i havent worked out the exact contents of each. And i need to investigate the funds in the sectors to see what it includes in terms of Oz and India etc.

masonic

You've specified that the US and the UK funds should be trackers, but what about the others? Are you considering active funds for some/all of these?

If so, then you could probably overcome some of the shortcomings of your geographic allocation through your choice of active funds (e.g. gaining some emerging markets exposure in Europe and Asia). You could also boost your exposure to smaller companies, perhaps such that you only need to cover the US/UK for your dedicated allocation. You would still lack any exposure to Latin America after this, though.

Alternatively, if you are going for a mostly/exclusively passive portfolio, then there is enough overlap with something like Vanguard Lifestrategy to make a case for a core and satellite approach, where you add funds to adjust Vanguard's asset allocation to your taste - e.g. with added property and smaller companies. Or buy a global tracker and add a UK tracker to boost home bias, then add in the bonds, property and small caps.

Zippeh

I've spent more time looking at allocation percentages (but not actual funds yet). Can you review and offer any advice?

European Tracker 10.00%
European Small Companies 5.00%
Uk Tracker 5.00%
Uk Small Companies 5.00%
Woodford Income 10.00%
US Tracker 25.00%
US Small Companies 5.00%
Emerging Markets Tracker 10.00%
Japan Tracker 5.00%
REIT / Property Fund 5.00%
Bonds 15.00%

I've held the Woodford Income fund since opening, and I'm happy with it's performance, but it currently makes up a large percentage of my portfolio (about 40%!). I will decrease this percentage, but would still like to hold on to it. In terms of Bonds, I'm open to suggestions as to whether they should be corporate, inflation linked, or whatever! I'm a bit concerned with the messages coming out of the bond markets that they're taking a hammering. Are they not the "safer" element they were once considered to be?

BLB53

I've spent more time looking at allocation percentages (but not actual funds yet). Can you review and offer any advice?

Surely it would be much simpler to use the Vanguard Lifestrategy 80 for the core of your portfolio - maybe add a few add ons as required - Woodford Income, property, smaller companies?

Zippeh

BLB53 wrote: »

Surely it would be much simpler to use the Vanguard Lifestrategy 80 for the core of your portfolio - maybe add a few add ons as required - Woodford Income, property, smaller companies?

So am I right in thinking that that would cover the following:

European Tracker
Uk Tracker
US Tracker
Emerging Markets Tracker
Japan Tracker
Bonds

In one lump? I suppose that would be easier than choosing / keeping track of all the separate trackers.

One of the reasons I didn't include this was its high percentage UK content. I'm trying to fight my instincts of home bias and going on market size more. And since I will be holding the Woodford Income which increases my UK exposure as well, I wanted to try to water it down from my core tracker element.

BLB53

So am I right in thinking that that would cover the following:

European Tracker
Uk Tracker
US Tracker
Emerging Markets Tracker
Japan Tracker
Bonds

In a word, yes.

From memory, the UK allocation is around 15% so if you include the Woodford fund, it would be overweight for UK - on the plus side, it is auto rebalance, diversified bonds and low cost @ 0.24% but obviously up to you.

dunstonh

Surely it would be much simpler to use the Vanguard Lifestrategy 80 for the core of your portfolio - maybe add a few add ons as required - Woodford Income, property, smaller companies?

Or the L&G Multi-index which goes wider than the VLS.