Equity percentage in the deaccumulation phase

pip895

My investments are spread over a S&S SIPP & ISAs and some unwrapped funds and savings bonds & accounts.  Cash is currently at about 15% and more than enough to cover 2 years expenditure.  I will receive a full state pension in the future and have a rental property but apart from that I am relying on my investments.

I have been running with an equity percentage of 60% although some of the funds I have in my "non equity portion" e.g. PNL contain equity so the actual equity percentage may be closer to 70%.  What equity percentage are others using and do others allow this to change as the market changes - for instance I took a more aggressive position during the crash but have now sold equity to return close to the 60% mark now that markets have largely recovered.

Albermarle

If you read this forum regularly you will see answers to your question about deaccumulation funds ranging from 100% cash ; 100% gold right through to 100% equity , so in the end you have to decide for yourself.
I think the typical financial advice would be between 35% for the more cautious types and up to probably 70% max , with the majority in the 45% to 60% region. I have not quite started deaccumulating yet but I am around  50% ( like you there is some debate about how to classify some IT's, ) + cash fund separate.

[Deleted User]

Also depends on the size of your pot vs typical annual expenditure. If your pot is very large then you can take a large loss for several years. In this case you can be in equities almost 100%. If you can’t afford a sustained loss and you are at the beginning of retirement then you need lots of fixed income.

Albermarle

In this case you can be in equities almost 100%

You also need strong nerves for this, so would not suit everybody even if they had a large pot/lower expenditure .

OldMusicGuy

I read Michael McClung's book "Living Off Your Money: The Modern Mechanics of Investing During Retirement" and used that to set my equity percentage when I retired. I'm not chopping and changing it, although once I am through the first 5 to 7 years I will revisit my strategy to see if it still makes sense. 

Prism

OldMusicGuy said:

I read Michael McClung's book "Living Off Your Money: The Modern Mechanics of Investing During Retirement" and used that to set my equity percentage when I retired. I'm not chopping and changing it, although once I am through the first 5 to 7 years I will revisit my strategy to see if it still makes sense. 

Thats what I intend to do. Somewhere between 55-65% for a 40 year retirement. I am also seriously considering a guaranteed income element before SP kicks in using a similar pool to a modern annuity investment. Its tricky though as it wouldn't actually be guaranteed since there needs to be a risk element in there. I suppose that a real fixed term annuity would work but might be too pricey.  

Linton

My allocation based on detailed assessment of meeting the retirement requirements results in a 60% overall equity allocation.  Cash is included as non-equity.

As the allocation is determined by the need to meet unchanging objectives it does not make sense to change it because of short term changes in economic conditions.  One's life-savings are too important to fiddle with in the possibly unsatisfied hope of making quick gains.

shinytop

About 55% equities, 18% cash and the rest wherever HSBC and Vanguard decide to invest it. I may go up to 60 or 65% equities but we have significant DB and also full state pensions.  

pip895

Linton said:

As the allocation is determined by the need to meet unchanging objectives it does not make sense to change it because of short term changes in economic conditions.  One's life-savings are too important to fiddle with in the possibly unsatisfied hope of making quick gains.

My change in Equity allocation has strict bounds - within the range 60 to 80%. 
Actually during the crash I never got close to 80% although that had been my original plan - in fact it was quite difficult just maintaining 60%.  At the point where equities were at their lowest I managed just 63% equities and had converted about 25% of my non equity holdings (mainly cash) to do it.  Equity recovered and by mid October it was up to 73% of my portfolio at which point I sold to return my percentage in equity to about 63% which is more or less where I am at the moment.  It has been a profitable process I am well ahead on the calendar year despite holding property funds and a high-ish percentage in the UK/ not enough Tec/US stock. Also very little of the monies hit the bottom of the market and I didn't pick the best investments when it did but it has been a good learning exercise - at least I have proved to myself that I can hold my nerve.   

With this thread I am trying to get a feel for if the 60% -80% equity position is reasonable or reckless. 
I would quite like my default equity to go a little higher perhaps to 70% - mainly because I don't much like my options in the "non equity" space.

TBC15

I’ve been retired about a year and half.

Apart from my 3yr cash bucket I’m 100 equities.

pip895

TBC15 said:

I’ve been retired about a year and half.

Apart from my 3yr cash bucket I’m 100 equities.

How much do you allow the cash % drop before topping up from equity in a downturn? Some say there is a sweet spot around 80% equities..  Do you have other income from say DB pension?