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Pension Reset - what your asset/geographic allocation be?

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My pension is lop sided through years of neglect and I'd like to 'reset' it. 

I've got £250k with maybe 20 years to retirement, and I'm quite happy to be on the moderate-to-high side of risk, so I'm thinking 100% equity is ok?

So, if you had a SIPP with £250k in cash in it today, how would position it for the next few years?

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Comments

  • eskbanker
    eskbanker Posts: 36,942 Forumite
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    I'd see a global all-cap index forming a reasonable allocation basis, at least as a starting point, unless you have strong convictions that something else is appropriate?

    https://research.ftserussell.com/Analytics/Factsheets/Home/DownloadSingleIssue?issueName=GEISLMS&IsManual=false
  • Thanks - so would just go all in a global fund?

    I've no strong opinions either way, and certainly a single fund seems easiest, but I guess I thought trying to make a global portfolio of different allocations (e.g. 30% UK, 45% US, 15% Asia Pac, 10% EM) would offer more flexibility. I was thinking once I'd broadly settled on the geo split I'd look a little deeper into specific funds/sectors.

    Those numbers are just off the top of my head but is even trying something like rather pointless, if the global funds already do it anyway?
  • george4064
    george4064 Posts: 2,927 Forumite
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    edited 31 March 2021 at 4:21PM
    If it were me, I’d stick it into a passive global equity fund. Job done.

    My pension is actually structured with a World ex-UK Equity Index Fund and UK Equity Index Fund, 95% in the overseas fund and 5% UK. Effectively the same thing as a global equity fund, just replicating that with the funds available.
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

    Save £12k in 2025 - #024 £1,450 / £15,000 (9%)
  • dunstonh
    dunstonh Posts: 119,594 Forumite
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    I've got £250k with maybe 20 years to retirement, and I'm quite happy to be on the moderate-to-high side of risk, so I'm thinking 100% equity is ok?

    Context is everything in discussions like this.  One persons low risk is another persons high risk.  However, on generic risk scales,100% equity would never be considered moderate to high.  That would be around the 75-85% equity ballpark (noting that the ratio of equities isn't enough to give you an accurate risk position as it depends on what those equities are).

     but I guess I thought trying to make a global portfolio of different allocations (e.g. 30% UK, 45% US, 15% Asia Pac, 10% EM) would offer more flexibility.

    Pulling random numbers out of a hat as long as they add up to 100% is not how you build a portfolio.  Sure you can do it but the lack of structure means you are attempting to be a fund manager and chances are you do not have the skills and knowledge to be a fund manager or access to the data required to build structured portfolios.    So, why would you do it?


    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
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    edited 31 March 2021 at 4:26PM
    My pension is lop sided through years of neglect and I'd like to 'reset' it. 

    I've got £250k with maybe 20 years to retirement, and I'm quite happy to be on the moderate-to-high side of risk, so I'm thinking 100% equity is ok?

    So, if you had a SIPP with £250k in cash in it today, how would position it for the next few years?

    Quite likely the “years of neglect” have served you better than regularly reverting to the order at the start of the journey.

    There is no “right” proportion to allocations; if there were, they would stay in proportion.

    Diversification is a zero-sum game; it will bring your investment outcome closer to the average; it won’t make you richer. 


  • Albermarle
    Albermarle Posts: 27,696 Forumite
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    One question you have to got to ask yourself is that if markets were crashing  and you were in a 100% equity fund , and that £250K could become £200K very easily in a couple of days . Then if over the weekend the news was all about the poor economic situation and markets were bracing themselves for the coming week , what would you do when there was the prospect of your fund dropping to say £150K . If you think you might be panicking , then a 100% equity fund is not for you ( and not for the majority , despite it being the kind of logical investment )
  • eskbanker
    eskbanker Posts: 36,942 Forumite
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    My pension is actually structured with a World ex-UK Equity Index Fund and UK Equity Index Fund, 95% in the overseas fund and 5% UK. Effectively the same thing as a global equity fund, just replicating that with the funds available.
    Out of curiosity, why use two funds to replicate one?

    Diversification is a zero-sum game; it will bring your investment outcome closer to the average; it won’t make you richer.
    It should if your undiversified choices were below average!  However, as discussed elsewhere, diversification isn't necessarily about maximising performance but managing risk....
  • El_Torro
    El_Torro Posts: 1,844 Forumite
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    Good points raised in this thread so far. I agree that if you want to create a portfolio that closely mimics a global tracker then why not just stick everything in a global tracker?

    As well as a global tracker I would consider maybe a global Smaller Companies fund too, since smaller companies aren’t well represented in a global tracker.

    If you want to play around with geographic allocations then you can still have most of your allocation in a global tracker. Just buy an Emerging Markets (or whatever region you want to be overweight in) fund to go alongside it.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
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    edited 31 March 2021 at 5:22PM
    eskbanker said:
    My pension is actually structured with a World ex-UK Equity Index Fund and UK Equity Index Fund, 95% in the overseas fund and 5% UK. Effectively the same thing as a global equity fund, just replicating that with the funds available.


    Diversification is a zero-sum game; it will bring your investment outcome closer to the average; it won’t make you richer.
    It should if your undiversified choices were below average! 

    Well, yes, sure.

    However, as discussed elsewhere, diversification isn't necessarily about maximising performance but managing risk....

    Agreed again. So long as managing risk is the main concern of the OP. Given the probable forty year investment journey ahead of Dr Strange. 
    There is a common misconception that diversification generates gains by its own virtue. It’s neutral, in that respect. 

    Whereas -I believe - resetting or rebalancing to a formal allocation relationship on the anniversary of some arbitrary date generally acts as a drag on performance.
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