Why doesn't everyone just buy Vanguard LifeStrategy?

bigadaj

chucknorris wrote: »

I don't disagree with you, in fact, I am almost doing the same thing. But I wondered do you have an age in mind when you will change tactics? When I reach my late 60's (6 years from now), after selling investment property, I'll have quite a lot in equities (ignoring a similar amount that my wife will have, but she is 11 years younger), plus I'll have fixed pension of about £22k (again ignoring my wife's SP).

At that age, I won't really benefit from the ability to invest after a correction, because the amount that I could invest would be a very small fraction of what was already invested (so no 'averaging' for me). My estimated lifespan will be about another 22 years from then. Would that lead you to change tactics? This is my dilemma.

Your plans should, aim to meet your goals.

If you currently have far more wealth than you will reasonably be expected to spend and no particular thoughts in inheritance or other post death uses then it makes sense to adopt a low risk strategy.

What a low risk strategy is is another question.

Some might argue cash only, but for me the safest way is diversification, so a reasonable but not huge amounts in equities, a reality large cash holding, maybe property in a hands off sort of way, I don't see much value in bonds currently, and things like p2p and vct I would consider diversification but in a minor specialist way and requiring more input and effort than other asset classes.

chucknorris

bigadaj wrote: »

Your plans should, aim to meet your goals.

If you currently have far more wealth than you will reasonably be expected to spend and no particular thoughts in inheritance or other post death uses then it makes sense to adopt a low risk strategy.

What a low risk strategy is is another question.

Some might argue cash only, but for me the safest way is diversification, so a reasonable but not huge amounts in equities, a reality large cash holding, maybe property in a hands off sort of way, I don't see much value in bonds currently, and things like p2p and vct I would consider diversification but in a minor specialist way and requiring more input and effort than other asset classes.

Thanks, I do value your input.

I do know that I should really be looking to adopt a lower risk strategy, although I am going to have to force myself. I recently switched all my SIPP and ISA to British Land (not that I consider that lower risk), I don't usually go for single company shares. But the yield is good and they are an asset rich company, so it seemed like a good fit (for the equity value after selling an investment property), although if I invested much more in REITs then I wouldn't be very diverse in sector. So maybe a significant holding in simply cash (or bonds is the answer) if I can match inflation or get to at least get near it. You may have noticed that I am tending to go around in circles on this subject. On the one hand I am comfortable taking on some risk, but I also recognise that I won't really be rewarded for doing so.

ams25

https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations

Reading the argu...er, debate here thought some might be interested in the table from Vanguard on long term returns by asset allocation. (Could not get a direct link to work).

I was 100% equities while working and acumulating but now (not working) and having achieved my retirement pot have moved to target around 60% equity (actual is 55% right now)... The risk of a long bear market while not earning/investing means a higher equity level for the extra % does not make sense for the retiree with sufficient funds to protect.

Apodemus

It also depends on how much of your total assets are part of the discussion. At present, I have roughly two-thirds of my current assets (savings plus investments) in my investment account. 17% of my investment account is currently sitting as cash, with the other 83% as equities. So although I would say my investments were 100% in equities, in reality my equity holdings only account for 55% of current assets.

Once I retire, my pensions will come into play (one DB, one DC and my SP). I would expect to add TFLS from the DC pension to my personally managed investments, placing the rest of the DC in drawdown. While the income from my investments will be important, they will still form, at most a quarter to a third of my total income. My scenario planning is for these holdings to contribute 3% yield, while maintaining long-term capital value.

At present my equity investments are 60% above the inflation-adjusted value, so my capital would remain preserved with anything up to a 37.5% drop. Yield (against inflation adjusted value) is currently about twice my target, so again, I can cope with a reduction in dividend rates.

I really don’t see my approach to equities changing with retirement, but I’m not there yet, so who knows!

EdGasketTheSecond

ams25 wrote: »

https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations

Reading the argu...er, debate here thought some might be interested in the table from Vanguard on long term returns by asset allocation. (Could not get a direct link to work).

I was 100% equities while working and acumulating but now (not working) and having achieved my retirement pot have moved to target around 60% equity (actual is 55% right now)... The risk of a long bear market while not earning/investing means a higher equity level for the extra % does not make sense for the retiree with sufficient funds to protect.

So what is your remaining 45% invested in?

ams25

EdGasketTheSecond wrote: »

So what is your remaining 45% invested in?

cash, P2P, bonds, property and absolute return. have 7 years until DB pension (14 until SP) so want some less volatile assets to help cover this period before they kick in . Then expect to raise equity % again.

username12345678

chucknorris wrote: »

I don't disagree with you, in fact, I am almost doing the same thing. But I wondered do you have an age in mind when you will change tactics? When I reach my late 60's (6 years from now), after selling investment property, I'll have quite a lot in equities (ignoring a similar amount that my wife will have, but she is 11 years younger), plus I'll have fixed pension of about £22k (again ignoring my wife's SP).

At that age, I won't really benefit from the ability to invest after a correction, because the amount that I could invest would be a very small fraction of what was already invested (so no 'averaging' for me). My estimated lifespan will be about another 22 years from then. Would that lead you to change tactics? This is my dilemma.

I've been wrestling with a broadly similar question.

I have 'enough' in my pot now with 10 years to go before drawing it down. The asset allocation I was given by the DFM felt too aggressive and UK equity income focussed for my position. My goal is 'inflation plus a little bit' and felt my portfolio should have been constructed with the minimum risk that historically produced that approximate return.

Instead I seemed to have a portfolio that hit the 'moderate/medium' risk profile I was assessed as after my initial IFA interview. I should say in the IFA's defence that it must be a challenge getting accurate and honest answers from clients.

I do think that a better way would be to work backwards:

1. What is your required retirement income/date
2. What the required return to achieve that
3. What asset allocation would historically produce that return
4. What has been the range of historical draw downs for that allocation
5. Can you tolerate that? If not go back to 1 and reassess

Instead it seemed like a bit finger in the air.

Audaxer

username12345678 wrote: »

I have 'enough' in my pot now with 10 years to go before drawing it down. The asset allocation I was given by the DFM felt too aggressive and UK equity income focussed for my position. My goal is 'inflation plus a little bit' and felt my portfolio should have been constructed with the minimum risk that historically produced that approximate return.

I understand your need to protect capital, but when you get to drawdown would you not need a better return than 'inflation plus a little bit' if you want to drawdown an income as well as keeping up with inflation? I'm interested as I'm recently retired and am currently moving lump sums from Cash ISAs to funds in S&S ISAs for a medium risk portfolio, where I hope to be able to take around 3.5% to 4% income and still have a bit of growth so that the portfolio keeps up with inflation.

username12345678

Audaxer wrote: »

I understand your need to protect capital, but when you get to drawdown would you not need a better return than 'inflation plus a little bit' if you want to drawdown an income as well as keeping up with inflation? I'm interested as I'm recently retired and am currently moving lump sums from Cash ISAs to funds in S&S ISAs for a medium risk portfolio, where I hope to be able to take around 3.5% to 4% income and still have a bit of growth so that the portfolio keeps up with inflation.

Working on a basic SWR of 3% of my present pot would give me the income I would be happy with in retirement which is why downside protection is more important to me than aggressively positioning for extra returns.

I've invested through dot.com, 00-03, 08/09, and had the odd catastrophic attempt at spread betting in between so I understand and accept that a given return requires a given risk but minimizing that risk is the number one priority.

If I was 20 i'd be 100% equities and praying for tons of volatility!

Audaxer

username12345678 wrote: »

Working on a basic SWR of 3% of my present pot would give me the income I would be happy with in retirement which is why downside protection is more important to me than aggressively positioning for extra returns.

I've invested through dot.com, 00-03, 08/09, and had the odd catastrophic attempt at spread betting in between so I understand and accept that a given return requires a given risk but minimizing that risk is the number one priority.

If I was 20 i'd be 100% equities and praying for tons of volatility!

Thanks, to give you a SWR of 3% I would have thought you would need maybe a medium risk portfolio for the pot to grow by roughly inflation plus 3% in retirement, so that you don't run out of money?