What's your equity split?

coastline

Nice to see some enthusiasm for the UK . I've posted for the last two years how value is creeping back in . Chart showing it's not always about the USA.

us_intl_cycle-720x268.gif (720×268) (mymoneyblog.com)

MaxiRobriguez

AnotherJoe said:

solidpro said:

I'm 30 years away from retirement so I have 6 figures invested in Pensions and ISAs which are 'adventurous' and roughly 80-100% equity. The split across all funds is roughly:

50% North America
25% APAC
15% EU
10% UK

What are you doing, and why?

I dont see the point of geographic splits, because mostly they are misleading.

For example, in your "North America" there will be some Apple and in UK, Unilever.

But Apple does maybe 60% of its sales outside NA, and Unilever perhaps 95% of its business outside the UK. Rinse and repeat for nearly every company.

etc. eg the notional geographic split is meaningless. Another example, a couple years ago, Unilever nearly moved overnight from UK to Europe just because they were going to move their HQ. Their business would have been unchanged.

I think if you do want to diversify (thats why you have these splits, right?) then you'd be better to do it across industry sectors. For example energy, finance, technology, banking, healthcare, etc. Even then it gets blurred because companies get moved from one sector to another. One day Facebook is technology and the next its communications or whatever (made up example)

Now, i dont really do splits as such but i have made "bets" on a couple  of sectors, I woudl never though make a bet on say APAC or UK, because in todays global world, unless you pick very niche companies you are really always getting companies that sell globally.

the only real split ive done and thats quite recent and should have been ages ago, is instead of a generic global fund, i have a generic global fund plus a couple of "smaller companies" funds (note, mostly "smaller" companies are still multi billion dollar companies.

Good on you for being nearly all equities as you have 30 years to go. All bonds will do, over that time period, is marginally smooth out a lower return. 

The geographical splits are useful, at the moment anyway, when considering shift to index investing and that the the US dominated by growth and the UK dominated by value.

Linton

MaxiRobriguez said:

AnotherJoe said:

solidpro said:

I'm 30 years away from retirement so I have 6 figures invested in Pensions and ISAs which are 'adventurous' and roughly 80-100% equity. The split across all funds is roughly:

50% North America
25% APAC
15% EU
10% UK

What are you doing, and why?

I dont see the point of geographic splits, because mostly they are misleading.

For example, in your "North America" there will be some Apple and in UK, Unilever.

But Apple does maybe 60% of its sales outside NA, and Unilever perhaps 95% of its business outside the UK. Rinse and repeat for nearly every company.

etc. eg the notional geographic split is meaningless. Another example, a couple years ago, Unilever nearly moved overnight from UK to Europe just because they were going to move their HQ. Their business would have been unchanged.

I think if you do want to diversify (thats why you have these splits, right?) then you'd be better to do it across industry sectors. For example energy, finance, technology, banking, healthcare, etc. Even then it gets blurred because companies get moved from one sector to another. One day Facebook is technology and the next its communications or whatever (made up example)

Now, i dont really do splits as such but i have made "bets" on a couple  of sectors, I woudl never though make a bet on say APAC or UK, because in todays global world, unless you pick very niche companies you are really always getting companies that sell globally.

the only real split ive done and thats quite recent and should have been ages ago, is instead of a generic global fund, i have a generic global fund plus a couple of "smaller companies" funds (note, mostly "smaller" companies are still multi billion dollar companies.

Good on you for being nearly all equities as you have 30 years to go. All bonds will do, over that time period, is marginally smooth out a lower return. 

The geographical splits are useful, at the moment anyway, when considering shift to index investing and that the the US dominated by growth and the UK dominated by value.

Also, if you are concerned about diversification across all factors there are a wide range of geography based funds, funds holding higher Growth and of course there are small company funds.  But there are few funds that globally add Value or emphasise sectors other than tech.  So you need to use appropriate geography based funds to get the right allocations.

Thrugelmir

MaxiRobriguez said:

AnotherJoe said:

solidpro said:

I'm 30 years away from retirement so I have 6 figures invested in Pensions and ISAs which are 'adventurous' and roughly 80-100% equity. The split across all funds is roughly:

50% North America
25% APAC
15% EU
10% UK

What are you doing, and why?

I dont see the point of geographic splits, because mostly they are misleading.

For example, in your "North America" there will be some Apple and in UK, Unilever.

But Apple does maybe 60% of its sales outside NA, and Unilever perhaps 95% of its business outside the UK. Rinse and repeat for nearly every company.

etc. eg the notional geographic split is meaningless. Another example, a couple years ago, Unilever nearly moved overnight from UK to Europe just because they were going to move their HQ. Their business would have been unchanged.

I think if you do want to diversify (thats why you have these splits, right?) then you'd be better to do it across industry sectors. For example energy, finance, technology, banking, healthcare, etc. Even then it gets blurred because companies get moved from one sector to another. One day Facebook is technology and the next its communications or whatever (made up example)

Now, i dont really do splits as such but i have made "bets" on a couple  of sectors, I woudl never though make a bet on say APAC or UK, because in todays global world, unless you pick very niche companies you are really always getting companies that sell globally.

the only real split ive done and thats quite recent and should have been ages ago, is instead of a generic global fund, i have a generic global fund plus a couple of "smaller companies" funds (note, mostly "smaller" companies are still multi billion dollar companies.

Good on you for being nearly all equities as you have 30 years to go. All bonds will do, over that time period, is marginally smooth out a lower return. 

The geographical splits are useful, at the moment anyway, when considering shift to index investing and that the the US dominated by growth and the UK dominated by value.

The US markets are dominated by a select group of companies. With regards to growth per se, there's now more unprofitable companies on the Nasdaq than there were at the time of the Dot Com boom. Easy to call something "growth" and pay over the odds for a stake on the basis of hope than an actual commercial proposition. 

username12345678

About 10 years from draw down.

50% equities:

Global large cap (passive)
Global Small cap (passive)
HVPE


5% gold
5% property

40% cash

chucknorris

AnotherJoe said:

solidpro said:

I'm 30 years away from retirement so I have 6 figures invested in Pensions and ISAs which are 'adventurous' and roughly 80-100% equity. The split across all funds is roughly:

50% North America
25% APAC
15% EU
10% UK

What are you doing, and why?

Good on you for being nearly all equities as you have 30 years to go. All bonds will do, over that time period, is marginally smooth out a lower return. 

You should not dismiss bonds so lightly, I have some very profitable individual corporate bonds (and others outperforming equities):

Wasps yielding about 30% PA gross equivalent, over 3 years (including the tax free capital gain) if they pay up at 100 pence (which is now a significant possibility).

Provident financial yielding about 8% PA gross equivalent over 2.5 years (including the tax free capital gain) if they pay up at 100 pence this September (which is now almost a certainty).

Bobziz

username12345678 said:

About 10 years from draw down.

50% equities:

Global large cap (passive)
Global Small cap (passive)
HVPE


5% gold
5% property

40% cash

That a fair bit of cash. What's your thinking, risk reduction ?

username12345678

Bobziz said:

That a fair bit of cash. What's your thinking, risk reduction ?

It is a lot of cash but the historical returns of a 50% equity allocation slightly exceeds what I require to meet my target.

And given fixed income yields I believe bonds offer 'return free risk' rather than the reverse (TIPS and short-dated corporates could be a different discussion). 

I'm not a believer in taking any more than the absolute minimum risk necessary.

Bobziz

username12345678 said:

Bobziz said:

That a fair bit of cash. What's your thinking, risk reduction ?

It is a lot of cash but the historical returns of a 50% equity allocation slightly exceeds what I require to meet my target.

And given fixed income yields I believe bonds offer 'return free risk' rather than the reverse (TIPS and short-dated corporates could be a different discussion). 

I'm not a believer in taking any more than the absolute minimum risk necessary.

I'm in a very similar position, although willing to take on more risk should an appealing opportunity arise. I guess the issue is whether future returns match historical. Credit Suisse forecasting a risk premium for equities of just 3.5% for generation z. Would 1.75% meet your target, or are you hoping the small caps and PE provide an above average return ?

Alexland

Bobziz said:

Credit Suisse forecasting a risk premium for equities of just 3.5% for generation z.

Worse it's 3.0% before fees but at least that's a real return after inflation.

I am more pessimistic expecting a long term return of only 2% above fees and inflation.