Ideal asset allocation

stphnstevey

We have had many questions about peoples current asset allocation and many say that their overweight in certain areas, which skew what people are actually trying to achieve

I was wondering what is your personal ideal asset allocation you are aiming for and what types of assets? Feel free to drill down to detail the assets classes, include your home if that's what you do.

If you can state why you choose those assets, if there has been any major changes and why and where you are in your life that may effect your choice

If you can give any idea on the levels of return or what you feel have been your best and worst choices, that would be appreciated

It's just a bit of fun, try not to take it to seriously and respect others choices

Alexland

There is no perfect answer otherwise we would all be doing it. It also depends on personal factors such as volatility tolerance, when you need to withdraw the money, etc. I include the rough value of our home (and mortgage liability) in my spreadsheet and it helps dampen the volatility on the numbers at the bottom.

Personally with a long time before I need to access the money I go with 70% global equities (mostly passive with a slight UK bias), 20% bonds and 10% in a cash fund which generates a modest return. I then switch out of cash gradually when an obvious dip occurs. In reality it might not deliver a better result than just putting more money in global equities but it means my paper losses are not as severe and I feel good about the dip as I am buying low and recover quicker. I hold the bonds and cash fund in my pensions as I want the higher growth in my ISAs.

Alex.

stphnstevey

Alexland wrote: »

There is no perfect answer otherwise we would all be doing it. It also depends on personal factors such as volatility tolerance, when you need to withdraw the money, etc. I include the rough value of our home (and mortgage liability) in my spreadsheet and it helps dampen the volatility on the numbers at the bottom.

Personally with a long time before I need to access the money I go with 70% global equities (mostly passive with a slight UK bias), 20% bonds and 10% in a cash fund which generates a modest return. I then switch out of cash gradually when an obvious dip occurs. In reality it might not deliver a better result than just putting more money in global equities but it means my paper losses are not as severe and I feel good about the dip as I am buying low and recover quicker. I hold the bonds and cash fund in my pensions as I want the higher growth in my ISAs.

Alex.

Thanks Alex, the second part of your post was what I was hoping for

I am not asking for a consensus on an ideal asset allocation, but interested in what others see as there ideal asset allocation (ie what are you currently targeting?). Yes, everyone's circumstances are different, but everyone can benefit from seeing what others do and relating it to your own circumstances, it may result in questions and discussions on what people currently do and why, spark new ideas and things people might not have considered. Or we may all be in the same sinking boat even and be fighting over the same life jackets!

As mentioned, its not so serious a discussion, just a "whats your strategy, this is mine, I do this because.., I am moving form this and getting into this because.."

Audaxer

I think that unless you are an experienced and confident investor knowing how to pick the best diverse range of single sector funds, most people would be best sticking with a low cost globally diversified multi asset fund with an equity/bond allocation to suit the risk/volatility tolerance.

stphnstevey

Audaxer wrote: »

I think that unless you are an experienced and confident investor knowing how to pick the best diverse range of single sector funds, most people would be best sticking with a low cost globally diversified multi asset fund with an equity/bond allocation to suit the risk/volatility tolerance.

Thats probably great advice

Would you care to add your current asset allocation to add to the thread

dunstonh

I was wondering what is your personal ideal asset allocation you are aiming for and what types of assets? Feel free to drill down to detail the assets classes, include your home if that's what you do.

There are many ways to build a portfolio. One thing that asset models do have consistency on is measuring them by target volatility (typically to fall within in a range that covers 95% of market events).

They then tend to look at current levels compared to historic levels and tweak the weightings to reflect that. For example, index-linked gilts have a low weighting at the moment and cash is having a higher weighting (at the expense of fixed interest) on a number of models. Some models don't include cash and they adjust the weightings in their way.

Some models adjust weightings to reflect timescale.

So, allocation models are not static. The move throughout the economic cycle and can have variations depending on the objectives. There is no one right way to do it. However, there are wrong ways to do it. The important thing is not to pick random allocations (e.g. 10% in 10 sectors) as that is just hit and hope and the lack of any structure will mean you are more reliant on luck than strategy. You would be better to use a multi-asset fund if you can't follow or utilise a proper model.

Herbalus

My investment numbers are such that asset allocation does not feature cash for me, because otherwise I would be around 80% cash. It is best to build up a cash buffer for 6 months spending before investing, so as I am in my 20s and newly mortgaged, S&S ISA balances are no means substantial.

In terms of what I have in those investments however, I am 100% equities through funds I can access again (ISA) if needed, and also those I cannot (LISA when I am 60).

For want of a better word I have taken a punt on the LISA and gone 33% emerging markets tracker, 33% Global tracker, and 33% uk small(er) cap.

For stocks and shares I am 100% in such a global multi-asset fund as advised above, with no component for bonds. The cash holding of the fund is around 2% last I checked.

Though when you are putting 3-figure sums in each month and started a year ago, a 20% market drop does not scare me because its not a huge amount I have invested. As it is a small amount, my target is growth as fast as possible, hence no bonds. I say I am happy to accept the volatility risk, but truth is I have only been in the markets a year and I have no idea what a 30% market drop actually feels like.

Alexland

First time with a big drop it can feel really bad and you kick yourself for not withdrawing everything just before it went wrong and persuade yourself it was inevitable as the signs were there but why didn't you take action, etc. Then even if you believe it will recover you calculate how much better you would have done if investing that money now...

BLB53

I was wondering what is your personal ideal asset allocation...

For me it is coming down from 60% equities and 40% bonds and property/infrastructure towards 50:50 as I reach state pension age.

But the main point is there is no 'one size fits all' as it will be essential for each individual investor to match the mix with their personality and capacity for volatility (most associated with a higher % of equities/smaller companies/emerging markets).

I like this article from the DIY Investor site...
http://diyinvestoruk.blogspot.co.uk/2016/05/asset-allocation-revisited.html

eskbanker

BLB53 wrote: »

For me it is coming down from 60% equities and 50% bonds and property/infrastructure towards 50:50 as I reach state pension age.

Do you have a particularly creative accountant or financial adviser who can squeeze an extra 10% out of somewhere?

ColdIron

eskbanker wrote: »

Do you have a particularly creative accountant or financial adviser who can squeeze an extra 10% out of somewhere?

Gearing