Ideal asset allocation

eskbanker

DiggerUK wrote: »

So called, *asset allocation* is a much hyped nonsense

[...]

As most here know, Digger Mansions moved our retirement savings in to gold.

So your asset allocation decision was to shove everything into an undiversified commodity with volatile pricing?

That's not to say it's an invalid decision per se, although its merits and disadvantages have been discussed frequently previously, but it's just as much an asset allocation decision as those more mainstream options that you deride....

JohnRo

Gold may not be how anyone here wants to consolidate and defend.

Sounds like you're conflating quite a few things there.

I'll stick to investing in productive assets thank you, via a 'hyped nonsense' allocation and rebalance model.

Globally diversified equity investments beat non productive assets like gold in terms of a meaningful return, in all but the most extreme, engineered outcome periods.

bowlhead99

Hmm, a quote from Digger, wonder what the theme of this will be about...

DiggerUK wrote: »

So called, *asset allocation* is a much hyped nonsense, peddled furiously by those whose living depends on convincing people it serves their best interest.

[thinks... is he going to say you can't trust a diversified allocation periodically rebalanced, best just put it in gold instead...]

As most here know, Digger Mansions moved our retirement savings in to gold. Much ridiculed at the time, now clearly revealed as a highly successful consolidation.

Ah

In fact I see no thoughts here how to defend what you have accumulated, beyond a duck and cover hope for the best mentality...

The thread isn't necessarily about defending what you have accumulated; we are all at different stages of our lives and the goal of many would be to attempt to grow what they have, rather than sit back and hoard what they've got.

Still, as nobody knows what the markets in which we participate will do next (stock markets, bond markets, property markets, gold markets, prices at the farmers' markets), its not a huge surprise that there's going to be an element of investing broadly and hoping for the best. Preparing for the worst and hoping for the best can be fruitless becaue your solution will only be best in the rare situation that 'the worst' actually happens. Preparing for 'the unknown' makes more sense, and if you are cautious, invest in things with low volatility.

Far better to learn how to judge the economic period you are in, and see which way it could go. Timing the markets is a game for slick traders with other peoples money. Reading the economics is how you best serve yourself.

"Timing the markets" sounds like what slick traders might attempt with other people's money.

"Reading the economics" and then applying those conclusions to determine what exposure one should take to different types of assets from time to time (stock markets, bond markets, gold markets, property markets, etc), sounds like a fancy way to say "timing the markets" while disdainfully looking down on other people who call it "timing the markets".

ivormonee

bowlhead99 wrote: »

"Timing the markets" sounds like what slick traders might attempt with other people's money.

"Reading the economics" and then applying those conclusions to determine what exposure one should take to different types of assets from time to time (stock markets, bond markets, gold markets, property markets, etc), sounds like a fancy way to say "timing the markets" while disdainfully looking down on other people who call it "timing the markets".

I wanted to include the other poster's quote as it's relevant to what I'm about to post but cannot see how to do it (I've tried the quote/ multi-quote buttons but it doesn't seem to work for me).

I think we've actually hit a fundamental theme regarding what constituites "timing" and the distinction to be made with "asset allocation" at any particular "time" (period) in the "economic cycle". Whenever I read anything online or in the papers written/ published by fund managers, platforms and the like they more often than not make suggestions, masquerading as "guidance" (but not "advice") such as "now is a good time for this", or "now is a good time for that". You hear the same suggestions at webinars, seminars and elsewhere from such establishments or their representatives.

For example, I often read comments (from them) such as now is a good time to go overweight in Japan, large caps, value stocks, widgets, whatever because we are at this stage or that stage in the economic cycle. Or, keep more money in your portfolio in cash to take advantage of an impending correction. Or, US stocks are scarily overvalued so go underweight in that region. You get the gist.

However, and this is the key, the very same people advocate putting together an asset allocation, suited to the particular personal circumstances of the investor, and sticking with it (subject to minor adjustments of rebalancing if required but maintaing the same original asset allocation at the same time). They generally advise maintaining it for at least five years.

So, on the one hand their advice is stick to your asset allocation, whatever the weather, yet they regularly advise changes based on where things are, essentially that is tantamount to timing the market.

Hence the contradiction.

ams25

Your asset allocation should change depending on your circumstances and risk tolerance, which are interrelated.

When I was working and 10 years from retirement I was 90% in equities... I had time to suffer and recover from a down market. Happened in 2008. My risk tolerance was high.

When I stopped working and was (initially) 9 years from a db pension I moved to 50% equities. My risk tolerance was much lower

As I get nearer to my db pension I will gradually increase my equity allocation as my risk tolerance and circumstances will change as my db pension reduces my dependency on investments (to c.50% of expenses)

it all seems sensible and common sense to me.

Concerns about the market being too high or good value may influence your allocation a little but should not dictate the allocation most suited to your circumstances. As is often said nobody know nothing about how markets will perform. We do know there will be corrections, crashes and bear markets. Not when, how deep or how long for.

Shame more have not shared their context and allocation here.

Carrieanne

DiggerUK wrote: »

I remember ISA rates at 6%, but never any higher.

So called, *asset allocation* is a much hyped nonsense, peddled furiously by those whose living depends on convincing people it serves their best interest. Far better to learn how to judge the economic period you are in, and see which way it could go. Timing the markets is a game for slick traders with other peoples money. Reading the economics is how you best serve yourself.

The 90s were boom times, so Digger Mansions invested in all kinds of funds, and did very well. Towards the end of that boom, the signs began to change. So investing in cash was how we went, building societies, NSI Index Linked, and PBs, all the way to the crash in 2007. This current period is once again boom time, born out of QE in the main, and easily available credit. Witness the worlds bourses to prove that.

But the cracks here and there, need to be taken on board when deciding how to allocate your savings now. Nobody here seems to be giving any thought to stress proofing your hard earned for a downturn. Elaborate *asset allocation* and *portfolio diversification* is no defence against another crash.

As most here know, Digger Mansions moved our retirement savings in to gold. Much ridiculed at the time, now clearly revealed as a highly successful consolidation.
Gold may not be how anyone here wants to consolidate and defend. In fact I see no thoughts here how to defend what you have accumulated, beyond a duck and cover hope for the best mentality..._

You're wasting your time at this forum; the vast majority are fiat ink on paper (and its electronic equivalent) fanatics who possess little or no knowledge of monetary history and have no desire to acquire any. Let them suffer the consequences.

JohnRo

Carrieanne wrote: »

You're wasting your time at this forum; the vast majority are fiat ink on paper (and its electronic equivalent) fanatics who possess little or no knowledge of monetary history and have no desire to acquire any. Let them suffer the consequences.

Fanatics you say...

Perhaps you could utilise your superior unfanatical knowledge and explain to idiot me what the heck the fiat ticket fraud has got to do with investing in productive equity assets which provide a far superior return to non-productive gold hoards?

eskbanker

Carrieanne wrote: »

You're wasting your time at this forum; the vast majority are fiat ink on paper (and its electronic equivalent) fanatics who possess little or no knowledge of monetary history and have no desire to acquire any. Let them suffer the consequences.

At least DiggerUK has put forward their thoughts on gold as an alternative to mainstream investing, what are you recommending?

Edit: looking back through post history it seems you're also a gold fanatic, I should have guessed from the dismissive reference to fiat! No further questions, your honour....

A_T

Egyptian Billionaire Puts Half His Net Worth in Gold

firestone

nice of him to tell people - out of the goodness of his heart i am guessing!