Please critique my proposed investment portfolio

theGrinch

Alexland wrote: »

Were you really thinking of spending all the money in the next 10 years?

I would like to pass as much wealth on possible should I ever have children and / or to my niece and nephew.

theGrinch

A couple of contributors have said equities seem toppy at present and this could affect future performance.

How can you mitigate this or do you just get on and invested?

Alexland

theGrinch wrote: »

I would like to pass as much wealth on possible should I ever have children and / or to my niece and nephew.

So look into the benefits of passing money down using certain types of pension rather than an ISA:
https://www.youinvest.co.uk/pensions-and-retirement/accessing-your-pension/sipps-and-death

theGrinch wrote: »

A couple of contributors have said equities seem toppy at present and this could affect future performance. How can you mitigate this or do you just get on and invested?

Yes over the medium term my view is that performance will be affected. What we don't know is if this performance will be one or more crashes followed by recoveries or just a steady boring period of slightly disappointing returns. Either way over the long term equities are still likely to be one of the best options if you can cope with the volatility.

Alex.

bowlhead99

theGrinch wrote: »

A couple of contributors have said equities seem toppy at present and this could affect future performance.

How can you mitigate this or do you just get on and invested?

The simple approach is not to worry about it too much and just get on and invest.

For example, over the last 9 years maybe a particular big pile of equities got you 10% annualised. If that was over the course of moving from 'bottom of a crash' valuation to 'seeming a bit toppy', you can bet that if you buy in now you won't get the same 10% annualised over the coming decade. Maybe the return will instead be 5% annualised or less - only half as good - but nobody knows really.

So, by starting your performance calculation from a toppy position instead of a bottomy position, yeah sure, this will probably 'affect your future performance'.

However, if not equities, what else are you going to buy to get 5% a year? If companies are not going to grow profits quite as fast using cheap credit, and central bank intervention isn't going to keep interest rates super-low, you probably shouldn't expect strong returns from commercial property and neither should you expect them from bonds or commodities. So if you do begrudgingly want the 5% as an alternative to the 10% that people were getting used to, you are still going to need to use equities to get it.

Basically, buying an equity piece of a business and participating in the upside in exchange for proper risks (rather than just taking a fixed return from lending then money or leasing them some premises), as long as it's done in a diversified way, is the best way to grow your wealth over the long term and keep up with your local and global neighbours, whose wealth you have to compete with as goods and services are priced in the future. Ignore equities and you won't be able to keep up with those who buy them.

The obvious counterpoint to that is if you don't hold equities while others do, and they fall, you can win a battle and be on top for a bit. But you don't know when the market's going to go down and if it starts to go down you don't know when to get back in to catch the rebound. You'd have to win a great deal of battles to win the war. It's maybe best to just accept you don't need to 'win' the war, just stay in it until you're close enough to the end of your life to no longer care. So, don't bother with those little battles of 'timing the market' along the way - just plod on with equities, building your wealth until you've either got more than you could realistically use, or no longer care.

A_T

theGrinch wrote: »

A couple of contributors have said equities seem toppy at present and this could affect future performance.

How can you mitigate this or do you just get on and invested?

Equities were "toppy" 12 months ago, also 2 years ago, also 3 years ago.

If you're worried about a crash historically government bonds are the asset that rises when it happens.

Alexland

A_T wrote: »

If you're worried about a crash historically government bonds are the asset that rises when it happens.

Unless you are worried about bond market crashes....
https://moneyweek.com/heres-what-happened-the-last-time-the-bond-market-crashed/
https://moneyweek.com/what-we-can-learn-from-the-bond-market-crash-of-the-late-1960s/

Alex

C_Mababejive

Bowlhead >>

"But with only a 15 year timeline starting from a market high point there is always going to be some (not insignificant) risk of not seeing the returns you've seen in other historic 15 year periods."




This is the bit that worries me. I'm in my early 50s and i have a fair chunk that i would really like to deploy but it feels like everything is too expensive,all the graphs are high,all the prices and indexes are high...it doesnt give me great confidence to shove all my chips on the table.

kidmugsy

theGrinch wrote: »

What are examples of "near cash" alternatives to bonds? Is this premium bonds too?

I view PBs as just cash. I was thinking of bonds near to maturity. For example you can buy funds/ETFs of bonds of remaining life 1-5 years. That's much nearer to cash than buying bonds with 10+ years remaining, or buying perpetuals such as the late War Loan, or, I suppose, preference shares.

Another (wonderful) near-cash investment is Index-Linked Savings Certificates from ns&i - so good that they stopped selling them years ago. Anyone who owns any will probably want to keep rolling them over.

Thinking about the desirable properties of cash I wonder whether money in fixed term accounts should be viewed as near-cash rather than cash. I'm arguing that "cash" should be on instant access or nearly so. A ladder of fixed term accounts is pretty close to a bond ladder but less liquid.

Thrugelmir

A_T wrote: »

Equities were "toppy" 12 months ago, also 2 years ago, also 3 years ago.

If you're worried about a crash historically government bonds are the asset that rises when it happens.

Talk of crashes is pure hysterics. Corrections can be far more subtle and longer drawn out.

Government bonds are (other than short dated) likely to fall as interest rates rise. The chase for yield has blinkered many people as to the potential loss of capital.

bowlhead99

C_Mababejive wrote: »

Bowlhead >>

"But with only a 15 year timeline starting from a market high point there is always going to be some (not insignificant) risk of not seeing the returns you've seen in other historic 15 year periods."


This is the bit that worries me. I'm in my early 50s and i have a fair chunk that i would really like to deploy but it feels like everything is too expensive,all the graphs are high,all the prices and indexes are high...it doesnt give me great confidence to shove all my chips on the table.

Well, see my later post. If only lower returns than you've seen before are on the table, that doesn't mean don't play the table. There aren't any other tables that seem overly compelling to play instead.

So it just means you may have to accept lower return for the same risk, than when you were in the middle of a 36-yr bond bull market or when you were in the middle of an equities recovery. Boo boo - but that doesn't mean don't play. At age 'early 50s' you will probably have to take some risks to keep growing the wealth or spending it for the next (potentially) five decades.

It can be hard to shove your chips onto the table if you are not currently playing and the odds don't look especially good. However, if you already had chips in play on the table, you wouldn't necessarily quit playing to find another game - as there aren't any games with massively investor-friendly odds. As such, a change in mindset might help you get money deployed, even if it's not all of it due to innate nervousness.