Retirement asset allocation

Linton

I agree that you are being far too conservative, dangerously so in my view. In particular you say that the 3.2% average return covers most of your expenses. What about inflation? The only reasonably sure way of matching or exceeding inflation over the long term is through equity.

My policy is to cover 3-5 years expenditure with cash and a further 3 or so years in cautious investments. The rest is in equity. If equity crashes you needn't sell any for 6-8 years which would seem enough. At 52 you need to be planning for perhaps another 40-45 years of life, so you wont need 3/4 of your money for 10 years at least. This is enough time for equity investment to be well justified.

Something else to look at: instead of having fixed term savings spread over various timeframes you could put it all in 5 equal tranches each deposited in 5 year accounts, but offset by one year.

bigadaj

Marine_life wrote: »

There's a bunch of stuff in there including aircraft leases, containers, infrastructure etc. They are generally long term and I've had them for a few years. Generally they seem to be paying a decent return although I'm not sure I would want to up the proportion too much.



A little bit of both. We have about a quarter of our retirement assets in Sterling and transferred some more money to the UK over the last few months when the rate has been so favourable.



Yes, I do think that's a concern.

Thanks for the feedback

So the fixed asset stuff is almost p2p like in secured lending terms.

That certainly looks more attractive than bonds.

I'd probably prefer to increase my property allocation than take in so much in bonds, and would personally want my bond allocation at below 10% currently.

Interesting that the hyp is popular in Germany, the U.K. frequently pays the highest dividends but it still seems a better idea than lumping into bonds with almost guaranteed capital losses and negative returns unless you look at low quality in which case you're negating the very purpose of holding bonds in the first place.

Marine_life

bigadaj wrote: »

So the fixed asset stuff is almost p2p like in secured lending terms.

In so ways yes, although these are long term closed end funds typically with a duration of 5-15 years so you need to be prepared to lock away the money for a decent length of time. Also the minimum investment is typically 10k.

Linton

Another vote for a HYP. About 20% of my drawdown monies are in an HYP which has steadily provided 5-6% dividends for the past 6 years. Apart from the UK there are good dividends available from global property and the Far East. I take all the natural income as it can be topped up from the long term growth part of the equity portfolio if needs be, though the drop-out rate has been low.

Marine_life

Linton wrote: »

I agree that you are being far too conservative, dangerously so in my view. In particular you say that the 3.2% average return covers most of your expenses. What about inflation? The only reasonably sure way of matching or exceeding inflation over the long term is through equity.

My policy is to cover 3-5 years expenditure with cash and a further 3 or so years in cautious investments. The rest is in equity. If equity crashes you needn't sell any for 6-8 years which would seem enough. At 52 you need to be planning for perhaps another 40-45 years of life, so you wont need 3/4 of your money for 10 years at least. This is enough time for equity investment to be well justified.

Something else to look at: instead of having fixed term savings spread over various timeframes you could put it all in 5 equal tranches each deposited in 5 year accounts, but offset by one year.

Thanks.

There are a couple of things that play in here.

Firstly, I have a 2% inflation assumption in my spending assumptions. I honestly cannot see inflation moving significantly over the next 10 years as the shock to mortgage payers would be too great i.e. people have become so used to low mortgage rates that any increase is likely to lead to a significant economic issue.

Secondly, I tend to think that as a result of low inflation, we will see lower investment returns than was historically the case.

Of course over the long term equities usually recover from any downturn but frankly, psychologically the thought of a 25-30% drop would be more than unpleasant! I'm more relaxed about my HYP as any share price fall simply results in an increase in the return. However I do take the point.

Marine_life

Linton wrote: »

Apart from the UK there are good dividends available from global property and the Far East.

Want to tell us which ones you are invested in

Linton

Marine_life wrote: »

Thanks.

There are a couple of things that play in here.

Firstly, I have a 2% inflation assumption in my spending assumptions. I honestly cannot see inflation moving significantly over the next 10 years as the shock to mortgage payers would be too great i.e. people have become so used to low mortgage rates that any increase is likely to lead to a significant economic issue.

........

10 years inflation may not be a great concern, but what about 20, 30, 40 years?

Linton

Marine_life wrote: »

Want to tell us which ones you are invested in

Schroeder FarEast and Global Property income funds. Other fund managers are available!

bigadaj

Marine_life wrote: »

Want to tell us which ones you are invested in

I've been in the Newton Asian income fund for a few years, one of the first and pretty good. Aberdeen obviously have a good reputation in Asian investment as well.

Whilst looking for hyp or income isn't a bad strategy in itself it's total returns at the end of the day, drawing down capital isn't an issue if your overall returns are sufficiently good.

Marine_life

Linton wrote: »

10 years inflation may not be a great concern, but what about 20, 30, 40 years?

I am less worried about that as we have some index linked pension which will pick up the majority of our spending (if not all) once they start from age 60. So in income / return terms I am only really worried about the next 8 years.