Cash vs shares at 62 years old?

Frozen_up_north

I was expecting a slump in share prices post brexit, but the opposite seems to have happened. However, the gloom merchants are predicting a slowdown in the next few months.

I took early retirement and am comfortably off with company pension income and am mortgage free. I currently have just over £120K invested in shares, most of which is under an ISA wrapper. The shares are mostly Fidelity Moneybuilder, which is fairly low risk, with just a few % in higher risk shares.

I have around £20K in cash, some of which is in an ISA.

My gut instinct is to move some of the shares into cash, perhaps to split the amount 50/50 between cash and shares, but returns on cash are abysmal at the moment and most of my shares are fairly low risk.

The investments are only needed for occasional spending, such as replacement car, house maintenance, etc.

I appreciate that none of us have a crystal ball, but your thoughts would be welcome.

jimjames

Bear in mind that you could have 25 years or more of retirement ahead. If your pension is covering your outgoings and you have cash available then I probably wouldn't change things.

badger09

Why is your gut instinct to move to something like 50/50 cash now?

You have presumably been investing for a number of years, and withstood the urge to move to cash when markets have fallen?

You could, hopefully, live for another 30 or so years. How much would your cash be worth then?

Someone far more experienced than me will be along soon, those are just my initial thoughts.

PS I'm older than you and moving more of my cash into S&S ISA:cool:

bigadaj

With near zero interest rates, a threat of cutting and even mesh tube rates then equities are still the only game in town from many perspectives.

It wouldn't make too much sense for me to move out of shares into cash currently.

However there are plenty of ways of making your cash work harder, you can get £50k into accounts paying 3% plus with some effort, and £120k if you are a couple. On top of that regular savers pay up to 6% on hundreds or even a few thousand pounds per month.

If you accept risk then p2p lenders offer higher returns with risk and frequently secured on assets or property, around 12% gross is possible though less if there are defaults.

Frozen_up_north

badger09 wrote: »

Why is your gut instinct to move to something like 50/50 cash now?
PS I'm older than you and moving more of my cash into S&S ISA:cool:

Thanks Badger, the reason for considering moving some shares to cash is (a) most of my older friends have mostly cash and (b) if a downturn lasts several years I haven't much spare income to bolster the investments with.

I was under the impression that post retirement, the investment rule of thumb was to migrate to safer savings, such as cash. But with cash returns so low at the moment, and seemingly getting worse, it might be a bad move.

AnotherJoe

Frozen_up_north wrote: »

I was expecting a slump in share prices post brexit, but the opposite seems to have happened. Not necessarily. This might simply be the effect of the pound falling. However, the gloom merchants are predicting a slowdown in the next few months. They dont know anything more than a blind dart throwing monkey.

I took early retirement and am comfortably off with company pension income and am mortgage free. I currently have just over £120K invested in shares, most of which is under an ISA wrapper. The shares are mostly Fidelity Moneybuilder, which is fairly low risk, with just a few % in higher risk shares.

I have around £20K in cash, some of which is in an ISA.

My gut instinct is to move some of the shares into cash, perhaps to split the amount 50/50 between cash and shares, but returns on cash are abysmal at the moment and most of my shares are fairly low risk. So in the past how has your gut instinct worked? Have you done this before? Its called market timing. Frankly, if you were any good at it you'd be a multi millionaire now. Obviously you arent (no offence meant, I'm not either ) All the stats show that it doesn't work. You can of course get lucky on occasion. But also forgo growth..

The investments are only needed for occasional spending, such as replacement car, house maintenance, etc.

I appreciate that none of us have a crystal ball, but your thoughts would be welcome.

Time in the market is more important than market timing. Brexit will be going on for, literally, years, and exit from the numerous EU trade deals will likely happen over an extended period, maybe 5-10 years. So when were you planning to exit the market and when go back into the market?

There will be numerous announcements over the next 2-3 years to do with Brexit and negotiations that cause stocks and the pound to rise or fall sharply. Maybe in different directions(shares down pound up or vice-versa) maybe together.
There is also the US election later this year, who knows what effect a result one way or the other will have.
There will be other things that happen that cause markets and currencies to rise and fall. Wars, oil prices, terrorism, the US Fed rate, political upheavals etc etc.

So, why did you single out merely Brexit as if it was important? Are you only invested in a few parochial UK companies? If not (as thats a bad idea) are you planning to cater for all these other events over the next X years that will have far more effect on global markets?

What by the way are your low risk shares?

badger09

Frozen_up_north wrote: »

Thanks Badger, the reason for considering moving some shares to cash is (a) most of my older friends have mostly cash and (b) if a downturn lasts several years I haven't much spare income to bolster the investments with.

I was under the impression that post retirement, the investment rule of thumb was to migrate to safer savings, such as cash. But with cash returns so low at the moment, and seemingly getting worse, it might be a bad move.

But have most of your older friends always had mostly cash, or have they migrated recently? I ask because many of my friends born in the late 1940s, 50s and early 60s, are very 'risk averse' and have avoided investing because they 'know someone who lost everything when xyz Ltd went bust'.

Sensible investors do not invest or rather, gamble, that way. In addition, my friends don't understand the risk/impact of inflation on long term cash holdings.

I wouldn't advocate being invested only in high risk areas at your/our age, but there are safer investments which should provide a better return than cash. I don't know which Fidelity product you are invested in, but now you have time, you might want to do some more research - I've found it fascinating, and these forums are a great place to bounce ideas around:)

oldwally

If you look at some of the biggest crashes in history 1929-32 1973-75 and 1999-2003 allthough amounts dropped roughly 50-70 % ie if u had £100 k in shares, at the market low point ,you might be down to 30-40 K. This is assuming you had a wide spread of shares(too narrow selection and some cos will go bust ).

Even at this depressed level,this broad spread of shares was still paying out "roughly "70-80% of the dividends that were being paid at the peak of the market. So allthough your income was down a bit,you were doing a hell of alot better than if you went all in to cash.

So for what its worth,if you feel abit uneasy at current levels,take some profits ,but that leaves you plenty of" ammo" when the next crash comes,as I sure there will be in the next 20 years or so,assuming your going to live to 90

AnotherJoe

Frozen_up_north wrote: »

I was under the impression that post retirement, the investment rule of thumb was to migrate to safer savings, such as cash. But with cash returns so low at the moment, and seemingly getting worse, it might be a bad move.

The reason for that was, in the 3-5 years leading up to retirement, (not post-retirement) you gradullay moved into very safe investments because when you then bought an annuity at age 65, you didnt want your investments to have crashed just before you bought one, for obvious reasons. That received wisdom is changing now especially if you are planning drawdown or general growth in the investments for say 10-20 years after retirement.

atush

Ideally you want 2-3 years income in cash if you are doing a drawdown. But if you already have pension income outside of this, then you may find 20K is enough (but you may not if yu need to buy a car or update your home anytime soon). So make sure you have enough cash for these med term needs plus an emergency pot.

Then look at income producing funds/trusts for some of your pile.

jimjames

Frozen_up_north wrote: »

Thanks Badger, the reason for considering moving some shares to cash is (a) most of my older friends have mostly cash and (b) if a downturn lasts several years I haven't much spare income to bolster the investments with.

Bear in mind that even if prices drop, generally the income doesn't drop in the same way. So some investment trusts have increased income for almost the last 50 years even through 2008/9. So your income is unlikely to be hit too much even if the market does drop.

I'd echo the previous comments, it's not always useful to compare to others. I'm still 20+ years from retirement and heavily invested. A lot of friends and colleagues only have cash but that doesn't mean I intend to follow them. It may historically have been suggested to have less investments but life expectancy has also risen too meaning you need to keep pace with inflation for longer.