What return are you targeting?

bostonerimus

Thrugelmir wrote: »

Trouble is someone starting off today is facing a very different challenge. Following Central Bank intervention to maintain stability in the global financial markets. With dovish appointments and further rate cuts a very real possibility. There's no certainty as to how matters are going to unfold. Around $13 trn of Government debt globally is offering a negative yield. Seems as if many investors are prepared to lose a little rather than a lot.......

That was the mantra when I started too; 1987 wasn't a great year and things looked tough in October. My take on it was to save as much as I possibly could as that was one thing I could control. Given an average lifespan I still have 30 years of investing to go and I see no reason to radically change the approach I've used for the past 30 years, and I think it would be sensible for most people too.

[Deleted User]

For those who like numbers, here are mine
Expected Inflation = -2%
Portfolio OCF = -0.75%
IFA and platform cost = -0.69%
Portfolio Dividend Yield = +2.87%
Hopeful Growth of Portfolio Net of Dividends and not including Inflation = +4%

Number I plan for (therefore net of everything above) = 3.43%

That's the plan - not quite sure if it works or not

OldMusicGuy

Like Linton, I too am retired and am in the decumulation phase. So all I need is for investments to match inflation. My base scenario assumes that my return only equals inflation and on that basis we should be fine. So if we get 3 to 4% after costs then we will be in a good place (unless inflation shoots up, at which point I will rethink things). I have a fairly defensive portfolio but think that should be achievable.

DunnersO

Hi all

I’m looking to start investing this year, and have been doing my own research so that I am familiar with the various options and associated risks. However I still come across terms being used by others which I don’t quite understand.

A few posts in this thread have used the term “defensive” in regards to their portfolio. What does this term mean? I’m assuming it’s a reference to a low equity percentage with income generating funds favoured over growth, but just wanted to be sure. And, if I am right, is this considered “defensive” due to the risk of a potential downturn?

Many thanks for any help for this newbie.

MaxiRobriguez

DunnersO wrote: »

Hi all

I’m looking to start investing this year, and have been doing my own research so that I am familiar with the various options and associated risks. However I still come across terms being used by others which I don’t quite understand.

A few posts in this thread have used the term “defensive” in regards to their portfolio. What does this term mean? I’m assuming it’s a reference to a low equity percentage with income generating funds favoured over growth, but just wanted to be sure. And, if I am right, is this considered “defensive” due to the risk of a potential downturn?

Many thanks for any help for this newbie.

It basically means accepting lower returns for less risk, and typically refers to blue chip companies and developed markets rather than small-caps and emerging markets. The crux being volatility should be reduced in the former compared to latter so you won't get stuck selling out your equity during a protracted (and heavier) down market.

Albermarle

A few posts in this thread have used the term “defensive” in regards to their portfolio

Can be a mix of things :

As you said a lower % equity
As said above can be retreating from emerging markets , small cap funds
Can also be switching to investments designed to ride out market slumps , although these will normally miss out on big market upswings as well . There are 'Absolute return ' funds , which have not done very well recently and also some Investment trusts .
In its extreme form , defensive can also mean switching into cash.

Prism

DunnersO wrote: »

Hi all

I’m looking to start investing this year, and have been doing my own research so that I am familiar with the various options and associated risks. However I still come across terms being used by others which I don’t quite understand.

A few posts in this thread have used the term “defensive” in regards to their portfolio. What does this term mean? I’m assuming it’s a reference to a low equity percentage with income generating funds favoured over growth, but just wanted to be sure. And, if I am right, is this considered “defensive” due to the risk of a potential downturn?

Many thanks for any help for this newbie.

Defensive can be used to represent a number of things but it typically relates to what happens during a crash or economic downturn. In equites, large caps are often considered more defensive than small cap stocks. Within equities health care, staples and utilities are more defensive than stuff like consumer disc and tech. Bonds are more defensive than equities etc

Thrugelmir

MaxiRobriguez wrote: »

It basically means accepting lower returns for less risk,

A higher risk level does not guarantee higher returns. Just the possibility of. Taking a contrarian view to the wider market often requires a patient approach. As short term performance tends to cloud many investors judgement.

Defensive stocks are favoured by investors who like the comfort of being in a herd. The popularity of such stocks driving the share prices higher and higher. More often or not they'll ultimately be disappointment when forecasts aren't met at some point.

MaxiRobriguez

Thrugelmir wrote: »

A higher risk level does not guarantee higher returns. Just the possibility of. Taking a contrarian view to the wider market often requires a patient approach. As short term performance tends to cloud many investors judgement.

Defensive stocks are favoured by investors who like the comfort of being in a herd. The popularity of such stocks driving the share prices higher and higher. More often or not they'll ultimately be disappointment when forecasts aren't met at some point.

I didn't mean "accepting lower returns for less risk" was guaranteed, more that the investors were just expecting it by making such portfolio moves.

It'll be interesting what with the rise in passive over the past 10-15 years, I suspect the large/developed market companies won't fare as well against others in the next downturn.

OldMusicGuy

In my case "defensive" means holding a large amount of cash so that I do not have to touch my investments for at least 10 years and having a set of multi-asset diversified global investments that have around a 50/50 equity/bond split overall.