How risk averse are you?

Eco_Miser

An annuity is a fixed monthly/annual sum for life, neither rising nor falling, (unless he has chosen to have it rise according to some formula, in which case the starting amount will be smaller). However, whatever you pay for it has gone for good.

With other options he retains his capital, but both capital and income are dependent on the market.

To answer your question, I consider myself cautious, but 75% of my liquid wealth is invested, not all in shares, some in a property IT, some in fixed interest funds.
I don't consider cash risk-free over the long term, having lived through periods of high inflation.

Thrugelmir

economic wrote: »

equities should prove to be safer then bonds in due time. bonds have peaked. equities will be the new safe haven once bonds start to collapse.

Which equities? Pressure on dividend payouts in a number of sectors.

AnotherJoe

An annuity is as "low risk" as you can get and will provide the certainty you seek. And with your current investments/savings mix odds are high it will give a better return than your mostly cash anyway.

Your current pension provider will generally only offer an annuity they sell which means it's likely to be not the best so using an IFA to find a deal for you is probably a very good idea.

There are still different options for annuities but the IFAa will explain them to you.

Glen_Clark

I consider myself risk averse. I have just taken advantage of the stock market rally to sell some shares bringing my exposure down to 70% diversified equities, 30% cash based (mainly 4.5% fixed ISA and NSI Index linked). I wouldn't want to risk any more in sterling cash because I am old enough to remember what rampant inflation is like. If Osborne continues to rack up debt at the current rate to fund a house price bubble (which he calls 'Growth' and 'Recovery') high inflation is inevitable. We don't have enough industry making things we can sell abroad to pay off Osborne's debts, because his housing market interventions and taxpayer funded subsidies have made it more profitable to invest in property instead.
Don't put all your eggs in one basket. Your 80% exposure to Sterling cash is risky - you just don't appear to have seen that risk.

Glen_Clark

I should add that my 30% exposure to Sterling cash is more risk than I am comfortable with at the moment. I am waiting for a fall in equity prices to put some of it back in, taking me nearer to the 90% equities 10% cash that Warren Buffet suggested to his wife for her inheritance.
Just keep the equities well diversified.:)

enthusiasticsaver

Glen_Clark wrote: »

I consider myself risk averse. I have just taken advantage of the stock market rally to sell some shares bringing my exposure down to 70% diversified equities, 30% cash based (mainly 4.5% fixed ISA and NSI Index linked). I wouldn't want to risk any more in sterling cash because I am old enough to remember what rampant inflation is like. If Osborne continues to rack up debt at the current rate to fund a house price bubble (which he calls 'Growth' and 'Recovery') high inflation is inevitable. We don't have enough industry making things we can sell abroad to pay off Osborne's debts, because his housing market interventions and taxpayer funded subsidies have made it more profitable to invest in property instead.
Don't put all your eggs in one basket. Your 80% exposure to Sterling cash is risky - you just don't appear to have seen that risk.

I should clarify that we have pensions as well and property. As we are retiring early we have to bridge a gap of 7 years. Our main source of income will be pensions but mine drops drastically due to me retiring early as I have worked part time a lot. The cash has only been in current accounts and regular savings(earning 3,4,5 and 6%) for a few years and was accumulated by saving hard as mortgage finished and a PET from my mum. As inflation is low I felt that keeping it liquid was sensible until we finalise our pension arrangements at the end of this year.

BananaRepublic

I am cautious over the long term and have almost all my savings in equities, mostly actively managed OEICs and unit trusts, mostly Europe and the UK. I feel that the traditional idea that cash is low risk, equities are high risk is wrong if you take the long view and avoid highly volatile markets. I suppose people use the term 'risk' to mean 'short term risk'. On the short time scale I am adventurous, but the short term does not (yet) interest me, since my investments are at least 8 years away from being 'cooked' and ready to consume. Once I approach 67, I will think about moving some investments into less volatile products such as bonds.

Glen_Clark wrote: »

I am waiting for a fall in equity prices to put some of it back in, taking me nearer to the 90% equities 10% cash that Warren Buffet suggested to his wife for her inheritance.
Just keep the equities well diversified.:)

Timing the market eh? You are clearly a risk taker.

Glen_Clark

enthusiasticsaver wrote: »

I should clarify that we have pensions as well and property. As we are retiring early we have to bridge a gap of 7 years. Our main source of income will be pensions but mine drops drastically due to me retiring early as I have worked part time a lot. The cash has only been in current accounts and regular savings(earning 3,4,5 and 6%) for a few years and was accumulated by saving hard as mortgage finished and a PET from my mum. As inflation is low I felt that keeping it liquid was sensible until we finalise our pension arrangements at the end of this year.

If you are planning on spending it fairly soon then cash is fine.
Just don't rely on inflation staying low.
All the ingredients for inflation, money printing, rising debts, commodity prices below cost leading to scaling back production and tightening supply, are all with us. If the Government tries to keep wages down they have to make it up with housing benefit because they have pushed housing costs up so high.
The Government needs high inflation to default on debts it can't pay.
When these ingredients combine to produce another bout of high inflation we will wonder why we didn't see it coming. It will all look so obvious with hindsight.:o

chucknorris

I'm 58, and my wealth is currently stored as:

54% investment property
20% shares
17% home
8% DB pension
1% cash

Soon (2-4 years) I will be selling property and investing the equity mainly in shares. When I reach state pension age (66) I would like to target the following:

12% investment property
40% shares
10% corporate bonds
12% home
20% DB/fixed pension/annuity
6% cash

Glen_Clark

BananaRepublic wrote: »

Timing the market eh? You are clearly a risk taker.

We can't avoid risk altogether.
Just spread our eggs around lots of baskets to reduce it.
If I had faith in my ability to time the market I would be 100% cash based instead of 30%.
As it is I will keep 30% cash based (only 6% is instant access without penalty, the remaing 24% is 4.5% cash Isa or NSI Index linked) unless I can buy back in for less that I sold for.