Additional Global IT

bostonerimus

Sue58 wrote: »

At the moment it is 100 per cent equities but I have a good cash buffer. My portfolio is now about 70 per cent IT's, however, eventually I think it will be all IT's.

Why are you such a fan of ITs?

Audaxer

bowlhead99 wrote: »

They are. Assuming you're talking about funds - rather than individual companies which could go bust within a year - there's still 50% loss potential over a year or two, and maybe the recovery would be long and drawn out over the subsequent 5-10 years rather than bouncing back immediately.

I wasn't talking about individual companies, although saying that ITs are also individual companies which could also technically go bust, which makes me a bit wary of putting too much into individual ITs.

I know 100% equities are high risk in whatever form, but in view of what others have said about bonds possibly having a big crash and not bouncing back, I'm just starting to wonder if cash would be a better diversifier to dampen down equity volatility rather than bonds?

AnotherJoe

Audaxer wrote: »

I wasn't talking about individual companies, although saying that ITs are also individual companies which could also technically go bust, which makes me a bit wary of putting too much into individual ITs.

I know 100% equities are high risk in whatever form, but in view of what others have said about bonds possibly having a big crash and not bouncing back, I'm just starting to wonder if cash would be a better diversifier to dampen down equity volatility rather than bonds?

That is my belief and practice, ive read so much over the past few years saying the disconnect between bonds and equities has changed and you can no longer expect bonds to rise when equities fall and vice versa.

Audaxer

AnotherJoe wrote: »

That is my belief and practice, ive read so much over the past few years saying the disconnect between bonds and equities has changed and you can no longer expect bonds to rise when equities fall and vice versa.

So as an example, if you had £100k to invest, instead of putting it all in a VLS60, you could put £60k in a VLS100 and £40k into cash savings. If you wanted to keep to the 60/40 split you would have to be quite disciplined as regards rebalancing. If there was an equity crash with a 50% drop I think it would still feel as if you had lost 50% of your investment, when you had really only lost 30% of the total.

I still find it hard to believe that all the bond indexes in the VLS60 could be as risky as the equity part, or even more so if they don't bounce back in a year so after a crash as would most likely happen after an equity crash.

Thrugelmir

Audaxer wrote: »

If there was an equity crash with a 50% drop I think it would still feel as if you had lost 50% of your investment, when you had really only lost 30% of the total.

When there's a "crash". The markets go red across the board by default. Doesn't mean that all the underlying companies are equally affected though. One needs to keep matters in perspective, and keep a cool head.

bowlhead99

Audaxer wrote: »

I still find it hard to believe that all the bond indexes in the VLS60 could be as risky as the equity part

Well, good, because nobody is suggesting that the 40% of the VLS60 which is made up of bond indexes is anything like as risky as the 60% of it which is made up of equities.

In the last equities crash a decade ago, the FTSE all-world index lost 58% in under two years (in USD terms). Nobody is suggesting that the bond indices making up the non-equities component of the VLS60 would lose anything like that.

if they don't bounce back in a year so after a crash as would most likely happen after an equity crash.

If you are shunning an entire asset class on the basis that they won't do the same as equities which you believe is to "most likely bounce back in a year or so" you should re-evaluate what you understand about the nature of financial markets, the difference between equities and bonds and how quickly the world economy would or could (not 'should') bounce back from some sort of crisis.

Audaxer

bowlhead99 wrote: »

Well, good, because nobody is suggesting that the 40% of the VLS60 which is made up of bond indexes is anything like as risky as the 60% of it which is made up of equities.

In the last equities crash a decade ago, the FTSE all-world index lost 58% in under two years (in USD terms). Nobody is suggesting that the bond indices making up the non-equities component of the VLS60 would lose anything like that.


If you are shunning an entire asset class on the basis that they won't do the same as equities which you believe is to "most likely bounce back in a year or so" you should re-evaluate what you understand about the nature of financial markets, the difference between equities and bonds and how quickly the world economy would or could (not 'should') bounce back from some sort of crisis.

Bowlhead, I wasn't shunning the whole asset class. I was just concerned about the bonds in my VLS funds in view of the comments in page 5 of the thread linked below:
https://forums.moneysavingexpert.com/discussion/5724110
As I know you have a very good understanding of these matters you have reassurred me that bonds haven't become as risky as suggested in that thread.

bostonerimus

You can make bonds as risky as you want.

bigadaj

bostonerimus wrote: »

You can make bonds as risky as you want.

Though if you want them very safe you can end up with negative returns.