Regret retiring too early with not enough money?

aldershot

Linton wrote: »

Safer corporate bonds or other forms of lending? More risky goverment bonds? Property (REITs)? Infrastructure funds? There are quite a range of options in between full blooded equity and gilts.

There are are range of options, all of which move you down the credit curve and head towards equity again. If you are selling equity because it'e expensive (aka risky), moving into sub investment grade credit in the search for yield does not seem particularly wise or diverse. If equity markets have a slump, corporate bonds will slump too, particularly from the record low credit spreads they currently occupy.

Financial assets are all interconnected and in a world of large negative real returns at the safest end of the curve, expecting to be able to find positive real returns in "safe" assets is likely to end in disappointment. I actually think equity offers the best return for the risk over the long run. All bond markets scare me at the moment.

gadgetmind

aldershot wrote: »

All bond markets scare me at the moment.

All markets scare me at the moment, but that's been true for every one of the 30 years I've been investing.

Markets high? Yikes, panic, divest!

Markets low? Well, usually low for a reason, with lots of fear and uncertainly around, divest!

Or "hold a bit of everything", make tweaks based on what's expensive/cheap/whatever if you like, but realise that your smart rebalancing will probably do no better (often worse) than fixed allocations.

Thrugelmir

jamesd wrote: »

No particular reason to believe that equities are in for sustained lower real returns, though now is not a good time to be buying them in quite a lot of markets.

Has been plenty of market commentary over recent months expressing an alternative view. With stock selection becoming an increasingly important factor.

westv

Beware of a North Korean inspired crash! :eek::D

jamesd

gadgetmind wrote: »

After decades of being an equity hog, and nearly 10 years at 80%+, I'm now roughly 40% bonds and 10% property. I've also split bonds 50:50 government and corporate, and within these 50:50 between blended duration (9 years corporate, 17 years gilts) and holdings of 1-5 year duration ones.

Hedging my bets? Retirement is maybe 6 months off, and I'll have 12 years until state pension kicks in, so yes!

Note that I don't intend to touch ISAs for 12+ years so they are still heavy with equities.

Yes, I've also traditionally been near 100% equities but have switched to much higher fixed interest over the last year plus. P2P in my case because I'm not keen on bond prices either and can get equity-like returns from P2P at the moment. All of my own ISA money is heading into P2P, with maybe £12-15k/year of interest from that which I won't end up buying VCTs to cover.

We're pretty similar in timings, with me able to stop work now whenever I choose.

scd3scd4

I am only 50 but have already mentioned it to the wife. I live in an over inflated house in the Docklands. I will stay on a few years after 65. Sell the house for something smaller in a nice part of the country and pocket a couple of couple thousand hopefully. What with both private pensions and the governments it should be gravy.

I have told the children not to expect any inheritance.

jamesd

Thrugelmir wrote: »

Has been plenty of market commentary over recent months expressing an alternative view. With stock selection becoming an increasingly important factor.

Depends how long you mean by sustained. I think of 15+ years and onwards to death for retirement income planning because the inverse correlation with cyclically adjusted price/earnings holds up to around 15 years but not beyond.

In the short to medium term - up to around five years - I've cut my equity holdings in part because of high values which are correlated with decreased returns over that timescale. And with a 25% a year probability of a big drop when the S&P is in its highest decile PE10. I'm happy to switch to less or even no equities for a while and back again later.

jamesd

aldershot wrote: »

..and does what with the cash? If it's buying bonds, what happens if we get into a 20 year bond bear market that sees a constant negative real return (where the coupon plus the change in principle value is < inflation)? Not an unlikely scenario IMHO.

He used bonds. Others found that bills (money market/cash) were likely to beat bonds in times of low rates, like now. There wasn't enough risk premium in the bonds to cover the potential capital losses at low rates.

I agree with your apparent view that bond holders could suffer badly for quite a while due to capital losses if rates go up and low rates if they don't. I'm largely avoiding bonds, using P2P lending instead. Or cash, for a while. I've never been high on bond holdings, they have looked unattractive to me for longer than equities in some markets.

P2P can have lots of potential correlations. Property development lending for standard residential or business in particular. Might be no exit or exit only well below anticipated sale price after significant delay. And valuations of the security can be dubious even for good times, let alone bad when there might be minimal buyer/developer supply too get the place completed or sold. Using say 70% of gross development value for the security, when GDV means value of completed project in today's market, is a recipe for potential pain.

My equity holdings in general have been doing fairly well, particularly European and UK small cap. Starting to get rather late in the cycle to be holding small caps, though.

gadgetmind

westv wrote: »

Beware of a North Korean inspired crash! :eek::D

Can we book this for March next year when I'm 55 so I can pull down my DC pension without being penalised for exceeding the LTA?

kidmugsy

gadgetmind wrote: »

All markets scare me at the moment, but that's been true for every one of the 30 years I've been investing.

Really? Equity markets didn't seem scary to me in the late eighties when I started investing. Nor did the gilts market in the late nineties when I moved there from equities. I do think asset prices are awfully high at the moment but then interest rates are awfully low.

Why not buy some gold? It's impossible to tell whether it's expensive or not.