Preservation vs Growth

barginfinder

Personally I'd look at another way - work out the min income you require indexed linked and after subtracting your state pension / any work pension etc, see how much it would cost to buy an annuity to provide that income. With whatever is left over you can accommodate more risk knowing that even if you lost the lot you will still survive.

Alexland

I would stay invested in diversified equities for around 65pc of the portfolio. And spread the rest across a cash fund and bonds. Yes shares are volatile but over the long term they have not been risky. Maybe if p/e ratios hit 20+ then I would scale back. I think I the old rules of bonds being low risk are not valid when the prices are so inflated by low rates.

Linton

The problem with simply choosing an x% equity fund is why that particular value of x? 60% say may feel right and but on what basis? Why not 40% or 80%. If you are going to choose a top level value it would seem sensible to have a rational way of calculating x.

Linton

bostonerimus wrote: »

Safe withdrawal rates are a function of asset allocation. If you move to a more cautious portfolio then you'll have to reduce your safe withdrawal rate. Historically the most "efficient" balance between risk and return has been a 60/40 asset allocation. Google "efficient frontier retirement".

In which market? Many countries' government bonds would have lost everything at some point in history. US experience isn't necessarily a good guide. Neither is 20th century history.

Malthusian

kidmugsy wrote: »

You could google the Harry Browne Permanent Portfolio. Mr Browne reckoned he'd be defended from pretty much anything if he held 25% gilts (or rather the US equivalent), 25% cash, 25% gold, and 25% equities. He wrote before the age of index-linked government bonds.

If you were frugal enough you could probably live on that, but with only 25% of the portfolio in assets which would be expected to beat inflation, and 50% in assets which would be expected to deliver nil return whatsoever, you will have to cut your cloth to your asset allocation - and that problem gets worse the longer you have to live on it.

The portfolio has little logic to it - 25% in cash and 25% in bonds is extremely conservative, something you would normally expect to see in "3 out of 10" risk-rated portfolios, but 25% in gold is a highly speculative gamble. It's more Split Personality Portfolio than Permanent Portfolio.

kidmugsy

Malthusian wrote: »

50% in assets which would be expected to deliver nil return whatsoever

You are wrong: only 25% is in income-free assets.

Malthusian wrote: »

The portfolio has little logic to it.

Wrong again: Mr Browne described his logic quite clearly.

IanSt

It's not a portfolio that I'd be happy with in these current times, but there are some interesting aspects.

Take a look at https://portfoliocharts.com/portfolio/permanent-portfolio/, the site also has another 16 portfolios you can view.