Old adage of splitting my estate, savings and investments 3 ways?

solidpro

Growing up, I seem to remember hearing a lot about splitting savings and investments 3 ways:

33% cash or near cash savings
33% investments such as equity, bonds or commercial property through investment funds
33% property.

Was I just imaging this or was there truth to this? Has it changed since the last few years savings have lost money against inflation?

I've got about 60% in property (including a paid-off house, I live in alongside some BTL), 35% in investments through pension and ISAs and about 5% in cash savings in a variety of, upon average, inflation-matching accounts. I stopped holding cash or near-cash in savings and premium bonds over a year ago when it just became silly, chasing meagre 100ths of percentage points which all lost money anyway.

So I'm not following this adage. What is the modern take on this?

Thanks

Nebulous2

I remember a lot of stock sayings that we were expected to live by, but all of them have gone - probably not before time. 

I lived in a fishing area, where the fishermen had an unusual status, kind of part-way between self-employed and employees. They were responsible for their own tax and they had their own version of your adage. Their saying was a third for tax, a third to spend and a third to save. 

I have a local authority pension scheme, and saw my house as my main asset. I remember reading my pension statement and realising my pension was worth more than my house.  Considerably so by now. 

Alexland

solidpro said:

Growing up, I seem to remember hearing a lot about splitting savings and investments 3 ways:

At different stages of life you will want different asset allocations but I can't imagine any point where you would want those 3 split equally.

When you are young you tend to build up cash until you can buy a property when you have lots of property, some cash and lots of debt then you gradually build up your investments and reduce your debt until you hopefully retire with lots of property, investments, no debt and some cash.

We are approaching middle age with lots in property & investments, some debt and a little cash so to get to the final retirement position we want more investments, some more cash and to eventually repay the debt.

bostonerimus

High house prices will make that 3 way even split difficult to achieve for many...also the percentage of cash can vary according to circumstances. For cash I think 6 months to a year's spending is what you should have at a minimum, whatever the percentage . But for a mature portfolio, 33% sounds high to me to out of the markets, of course if you can afford to have that high a percentage earning very little then you are in a good situation. My annual spending is quite small and so 5% in cash is more than enough as an emergency fund. My real estate is at about 25% right now.

Linton

In the old days "property" meant holding commercial property, perhaps city centre offices and shops, in order to get a steady rental income.  It was considered a solid basic investment.  In the past 60 years the commercial property market has been completely transformed by land speculation and rental income seems to be seen as a secondary objective.  So property can no longer fulfil the role it had when the adage was put forward.   Sadly there is nothing to replace it. One's own home is not an equivalent.

bostonerimus

Linton said:

In the old days "property" meant holding commercial property, perhaps city centre offices and shops, in order to get a steady rental income.  It was considered a solid basic investment.  In the past 60 years the commercial property market has been completely transformed by land speculation and rental income seems to be seen as a secondary objective.  So property can no longer fulfil the role it had when the adage was put forward.   Sadly there is nothing to replace it. One's own home is not an equivalent.

You can own funds that specialize in real estate and directly owned residential rentals can provide income and capital growth in retirement portfolios, but they come with a lot of caveats. I have a rental that provides good monthly income and has appreciated over the years so I like it as part of my retirement portfolio...it's about 8% of the portfolio value.