Newbie questions on Asset Allocation and Passive v Active

Filo25

bostonerimus wrote: »

What are your reasons for choosing those percentages?

I'm definitely not tied to them with any certainty!

From my point of view it gives me a widely diversified geographical holding with enough exposure to each area where it makes a meaningful difference to my portfolio without dominating it completely, a bit of homefield advantage for the UK obviously, maybe too overweight ASPAC/EM/Japan, but I do find those interesting areas.

bostonerimus

Filo25 wrote: »

I'm definitely not tied to them with any certainty!

From my point of view it gives me a widely diversified geographical holding with enough exposure to each area where it makes a meaningful difference to my portfolio without dominating it completely, a bit of homefield advantage for the UK obviously, maybe too overweight ASPAC/EM/Japan, but I do find those interesting areas.

There are lots of global equity funds that do this diversification for you already. If you are going to construct your own portfolio then at least run it through something like trustnet and see the gains and volatility you might expect.

Audaxer

Filo25 wrote: »

Thanks again everyone the advice is once again much appreciated.

To be honest before I started reading on here my initial thought was just to go 100% equity (even my taste in bonds was very much towards higher yielding stuff like Gam Star Credit Opportunities), so I am certainly open to that approach.

I like to think I wouldn't panic at a market collapse at least over the short to medium term, I will be feeding enough into my pension and ISA that I would actually welcome one in the near future, maybe just reassess that in another 5-10 years.

Even if you have a very long time frame, as presumably you intend to keep it invested when you retire and start drawing from your SIPP, you should only go 100% equities if you have the risk profile to stomach big fluctuations. If you went with your own DIY percentages and invested the £90k now and there was a market crash over the next 6 months that saw the value drop to £45k or less would you be okay with that, or would you start to panic and question your allocations? I just think you need to ask yourself these questions before getting carried away and going 100% equities rather than the 60:40 allocation you first asked about. Good luck.

aberlyfid_2000

Linton wrote: »

I dont see High Yield as particularly useful unless you want income. If you hold bonds at all in a relatively long term portfolio I would go for Strategic Bond funds at the moment. These are actively managed bond funds where the manager makes the choice of what types of bonds best suit the economic conditions. Bond investing, unlike equity investing, is essentially a mathematical exercise as the returns from any particular bond are known in advance. I believe management of bond portfolios is best left to the experts and their software.

bond investing does not require any more mathematics than analyzing bank accounts- does the credit worthiness and the lockup term appeal to you, or not?

Filo25

Audaxer wrote: »

Even if you have a very long time frame, as presumably you intend to keep it invested when you retire and start drawing from your SIPP, you should only go 100% equities if you have the risk profile to stomach big fluctuations. If you went with your own DIY percentages and invested the £90k now and there was a market crash over the next 6 months that saw the value drop to £45k or less would you be okay with that, or would you start to panic and question your allocations? I just think you need to ask yourself these questions before getting carried away and going 100% equities rather than the 60:40 allocation you first asked about. Good luck.

I suppose my view on that is that if I have already lost 50% of my portfolio value, it is probably a bit late to be worrying about asset allocation, in fact at that stage it becomes a pretty simple decision to stay 100% equity, although would I be questioning my original decision to go 100% Equity..... quite possibly, but who knows when this bull market is going to end.

If I was closer to retirement and we were talking about a more substantial proportion of my hoped for funds being invested in this way then it would no doubt be a different answer!


Thanks for the tip on fund analysis bostonerimus!

Filo25

bostonerimus wrote: »

There are lots of global equity funds that do this diversification for you already. If you are going to construct your own portfolio then at least run it through something like trustnet and see the gains and volatility you might expect.

A first stab at something would give me an FE risk score of 89 which I presume is on the high side for an internationally diversified portfolio.