The Boring Bit of the Portfolio

Thrugelmir

The period covers the rise and fall of the DOT Com boom. A defensive strategy didn't suffer the capital losses incurred in the fall out. From the graph you can see how the FTSE World suffered until 2002.  Slowly recovering ground since. Eventually will come back into line providing there isn't another major set back.  A good reason why 100% equity portfolios carry a high degree of both risk and volatility. There's no guarantee that over any given time frame that such an investment route will be beneficial. 

Aminatidi

csgohan4 said:

it's like the tech funds, which previous weren't doing well and has shot up tremendously, 

So good to diversify your funds to make up any shortfall.

Obviously hindsight is great and you probably would have gone all in  in CGT

I don't know how you even legislate for what SMT has done this year though.

Who would have predicted that?!

I said earlier that I value not losing money and this is why - it's actually quite stark.

I've only been investing for a couple of years but I've been very careful to try and look at more than the past 10 years because it's really easy to think "just throw it all in a global tracker".

That said if you have time on your side and you're sure you'll sit back and do nothing that might be the right approach for your situation too.

darkidoe

Reading with interest.
I think with DIY investing, it takes quite a bit of time to appreciate the all weather approach. The difficulty of finding an attractive non-equity option.
The potential impact of rising interest rates on bonds.
High price of gold.
It is interesting to see how these professional fund managers do asset allocation, despite all the 'difficulties'. 

Aminatidi

darkidoe said:

Reading with interest.
I think with DIY investing, it takes quite a bit of time to appreciate the all weather approach. The difficulty of finding an attractive non-equity option.
The potential impact of rising interest rates on bonds.
High price of gold.
It is interesting to see how these professional fund managers do asset allocation, despite all the 'difficulties'. 

One of the beauties of investment trust is that they tend to be a lot more transparent about what they hold and often publish the full holdings rather than just the top 10.

Some funds do too but most seem to do a pie chart of the asset allocation but only tend to publish the top 10 other than in the annual and interim reports.

Albermarle

The difficulty of finding an attractive non-equity option.

Apparently holding cash is back in fashion .

darkidoe

Albermarle said:

The difficulty of finding an attractive non-equity option.

Apparently holding cash is back in fashion .

True. Holding cash for an emergency fund is still of value. For a working working adult, I would presume the general rule of thumb of 6 months expenses will suffice.
Holding cash as part of a long portfolio is a more complex decision, given the alternatives of bonds and indeed gold as uncorrelated asset classes. My view is it really boils down to the size of portfolio in question and how 'sophisticated' we want our portfolios to be. Most DIY investors, me included will begin the journey by seeking how to maximize returns with minimum effort required. As I read and learn more, I am beginning to be more open to having a non-equity portion as a strategic allocation. Still a work in progress though. 

george4064

Really interesting conversation and some good points made throughout.

The traditional stocks/bonds portfolio does not offer the same diversification as it did in the past, primarily down to how yields have been suppressed so much with loose monetary policies which in turn has made bonds seem very expensive and skewed to the downside.

Personally I am still young (29) and in the accumulation stages of my life so my S&S ISA is 95% equities and 5% property, with some cash savings but no defensive part of my portfolio as I am always happy to simply buy more equities if they drop. In the meantime I continue to slowly drip feed quarterly to rebalance.

Some point in the future I will need to think about adding some more defensive assets in my portfolio, but since it’s a long way off I don’t need to decide now. However I do like the idea of holding infrastructure as a defensive ‘sleeve’.

DiggerUK

It's of limited use considering what suitable 'non equity' items are needed when the roof is leaking.

It has been pointed out that gold is a high price atm, and historically it remains so. But it is £200 an ounce down off its all time high and looks likely to fall more. Gold is an all weather defensive 'non equity' item only when obtained with forethought, not as an afterthought..._

bowlhead99

DiggerUK said:

It's of limited use considering what suitable 'non equity' items are needed when the roof is leaking.

Gold is an all weather defensive... 

That's where i've been going wrong with my leaky roof, I've been messing around with felt or bitumen and didn't consider gold's weatherproof properties.  Well if it's good enough for filling teeth it can probably plug a hole in a roof, but I expect the roofers at Digger Mansions still get a surprise when they see it.

DiggerUK

Roofs have been weatherproofed with copper and lead sheeting, but I've  never seen it done with gold sheet. Bit OTT if you ask me, but each to their own..._