Is this a reasonable plan?

captainreckless

I am moving out of the UK to work this year and as such I will no longer have access to my DB pension. Therefore, I'm going to invest an amount equivalent to my current pension contributions plus my current employers contribution plus a bit more to take account of the fact that I won't be in a 'gold plated' public sector scheme any more. I'm aiming for £1200 a month to start with.

I'll be holding any investments for more than 20 years and I wish to gain broad exposure to global equities with a gradually increasing bond allocation as my (hopefully) early retirement draws near. I'll also be making voluntary NI contributions.

My plan is to invest in a cheap FTSE All World Index tracker as a core holding along side some actively managed funds to boost exposure to emerging markets. Later on I'll add in some bonds. I expect to experience at least two stock market crashes in this time. I also expect that everything should average out to inflation plus 5% over several decades.

I would like to know if this is a stupid plan that contains a flaw that I am unaware of that will leave me destitute in retirement.

Thrugelmir

captainreckless wrote: »

I also expect that everything should average out to inflation plus 5% over several decades.

On what basis would you expect that level of return?

captainreckless

I Googled for 'long term inflation adjusted stock market returns' and then took a guess.

Alexland

I think a return of around 2% above inflation and fees is more realistic given the medium term economic outlook.

Vanguard, one of the world's largest asset managers, is forecasting that a 100% global shares portfolio will only return around 4% per annum over the next 10 years!

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/markets-economy/why-investors-prepare-for-lower-returns

Alex

captainreckless

So the suggestion is that I should chase higher returns somehow? I'm already 100% equities as it is!

Alexland

captainreckless wrote: »

So the suggestion is that I should chase higher returns somehow? I'm already 100% equities as it is!

No we are just suggesting you base your plan on more realistic expectations for the medium term. Perhaps in the later phase there might be better market growth but as you say you will be reducing market exposure to get some better certainty of outcome which is perfectly understandable.

captainreckless

Fair enough. To be honest, all I'm really interested in is not making real terms losses over the long term. I don't have any plans that depend on achieving a certain return. I'm investing more out of a sense of prudence than any desire to make money.