Drawdown portfolio - views

TBC15

dunstonh wrote: »

It has had a good run in a growth period. However, it's risk level is high. So, expect 40-50% losses in a negative period. So, do you fancy seeing your pension fund value fall by nearly half between statements?

And as this is a drawdown thread, just imagine what that fall in value would do to your income and capital erosion.

Been there not quite 50% I’ll admit. If you have a couple of years of cash behind you whats the problem?

The trend will always be up.

Stick with the program and don’t fear out. If you don’t like paper losses put it on deposit would appear to be the way to go.

dunstonh

Been there not quite 50% I’ll admit. If you have a couple of years of cash behind you whats the problem?

A drop of 50% requires 100% growth to recover.

If the person in drawdown continues to draw the same amount, the growth may get eaten and it may never recover.

If they can afford to be flexible with their income, then that wont be an issue. If they cannot afford to be flexible then they would be investing too high above their capacity for loss.

Stick with the program and don’t fear out. If you don’t like paper losses put it on deposit would appear to be the way to go.

Risk is not on/off. it is a sliding scale. You shoudlnt look at either end and decide they are the only two options. Lots of things in the middle and that is where most people in retirement are.

TBC15

dunstonh wrote: »

A drop of 50% requires 100% growth to recover.

If the person in drawdown continues to draw the same amount, the growth may get eaten and it may never recover.

If they can afford to be flexible with their income, then that wont be an issue. If they cannot afford to be flexible then they would be investing too high above their capacity for loss.




Risk is not on/off. it is a sliding scale. You shoudlnt look at either end and decide they are the only two options. Lots of things in the middle and that is where most people in retirement are.

All good points.

However would the not risk adverse potential retiree with a couple of years of cash behind him be a fool to put all his eggs in the Fundsmith basket to simplify the process in the future?

Apologies to the OP for the diversion, I should probably start my own thread. It’s hard to resist asking questions when one’s own retirement clock is ticking rather loudly.

jamesd

Not a fool, but unwise. Too much exposure to the risk of one individual getting things wrong. 10% in it? No problem. You can probably find some others you like and add in some trackers as well.

If you really want simplicity, that's the territory of global tracker funds. That eliminates the risk of manager change leading to performance change.