Embarrassed 40 year old - no pension.

sho_me_da_money

MallyGirl said:

I am not making a recommendation as I am not qualified to do that but maybe take a look and see if they offer:
L&G PMC Global Equity (30:70) 75% Currency Hedged

We have just been told that our workplace pension is likely being moved to L&G and this is the fund suggestion as closest match to the BlackRock one I currently invest in. International, UK and Global Emerging Market.
I am sure there are others on your list if you want to spend a few hours doing some research.

Hey Mally, 

So I logged into my LG portal and clicked on 'Manage My Pension'. From there I chose 'Investments' and saw this



I then clicked on 'Browse Available Funds' and saw this unfiltered list:



If I filter the list by fund type equity, I see just these options:



Any ideas which of these will be best for me. I dont think I saw the one you mentioned....grrrrr

Albermarle

If you invested 70% in current fund . 10% in UK and 10% in Emerging Markets and 10% in smaller companies you would have a better balance in my opinion..
Others may suggest different approach and/or different % .

There is no absolute right and wrong , just usually some diversification ( not all eggs in one basket) is usually a good thing. 

MallyGirl

I am really not qualified to answer that - it looks like we have some that overlap and some differences.
They seem to be making you choose the separate parts and the amount of each - Ex-UK plus UK plus maybe EM.

The one I am offered is 62.1% International, 29.6% UK, 8.3% Global EM but who is to say that is right?

kuratowski

The ones near the top, Global Developed Equity Index Fund + Emerging Markets Index Fund would do it?  Optionally with Smaller Companies as well.

sho_me_da_money

Am I right in saying that splitting the fund with a 60% (international), 20% (UK) and 10% (emerging) is a good balance. So perhaps based on the options I have above I go for

60% global developed or world exUk (not sure which one)

20% PMC UK

10% emerging markets

10% smaller companies

Maybe that work as a good balance?

sho_me_da_money

Albermarle said:

If you invested 70% in current fund . 10% in UK and 10% in Emerging Markets and 10% in smaller companies you would have a better balance in my opinion..
Others may suggest different approach and/or different % .

There is no absolute right and wrong , just usually some diversification ( not all eggs in one basket) is usually a good thing. 

When you say current fund. You are speaking of the one I am 100% right now, which is world Ex UK right?

MaxiRobriguez

sho_me_da_money said:

Am I right in saying that splitting the fund with a 60% (international), 20% (UK) and 10% (emerging) is a good balance. So perhaps based on the options I have above I go for

60% global developed or world exUk (not sure which one)

20% PMC UK

10% emerging markets

10% smaller companies

Maybe that work as a good balance?

There isn't a "good balance" that works for everyone. You have to decide what works for you. As long as you are reasonably diversified, which you currently are, then you are sort of playing with the deckchairs on the titanic. 

You currently do not have any UK, EM or Small co exposure. By not having that you are choosing to forgo high dividend yields but likely lower growth (UK) and also the potential for some very high growth, but with some very high risk (EM/Small Cos).

On the flip side, by reducing your global allocation to introduce the above, you will sacrifice an element of the global allocation. That typically means the biggest exposure reduction will be to the US market, currently dominated by growth stocks. So if these continue to outperform like they have done for the last four years, the act of introducing EM/UK etc will act as a drag on your portfolio. Yet these US growth stocks are very expensive, so there's every chance their outperformance is in the rear view mirror. In that scenario shifting away from that allocation to other areas will have been a good move.

These things can only be answered in hindsight though. EM/UK may outperform US. It may not. No one knows.

What I would say is your new proposal is likely, albeit not guaranteed, to increase your volatility - ie, the range your funds go up or down on any given day in £ terms will increase. EM funds are dominated by Chinese stocks which are about as volatile as you can get at the moment, and the UK is still forging the relationship with the EU which can lead to further risk-off sentiment even if we're passed the worst of it now. 

kuratowski

Global developed world includes UK, at about 4%, in line with the UK's market capitalization.  On average, loosely speaking, UK investors do tend to invest a greater proportion into UK listed stocks than their market weight - this is called being overweight the UK.  There isn't a right or wrong answer here.  In the past decade, being overweight the UK has given worse returns.  In the decade before that, it would have given better returns.  Nobody knows what will happen in the future.

If you are going with global developed world, you don't need to add UK as a separate fund, unless you want to overweight.  If you use world ex UK then you do want to add UK, otherwise you have no UK exposure at all.

Some potential portfolio configurations might be:

90% global developed world + 10% emerging markets

85.5% global developed world + 9.5% emerging markets + 5% smaller companies

70% world ex UK + 20% UK + 10% emerging markets

66.5% world ex UK + 19% UK + 9.5% emerging markets + 5% smaller companies

sho_me_da_money

MaxiRobriguez said:

sho_me_da_money said:

Am I right in saying that splitting the fund with a 60% (international), 20% (UK) and 10% (emerging) is a good balance. So perhaps based on the options I have above I go for

60% global developed or world exUk (not sure which one)

20% PMC UK

10% emerging markets

10% smaller companies

Maybe that work as a good balance?

There isn't a "good balance" that works for everyone. You have to decide what works for you. As long as you are reasonably diversified, which you currently are, then you are sort of playing with the deckchairs on the titanic. 

You currently do not have any UK, EM or Small co exposure. By not having that you are choosing to forgo high dividend yields but likely lower growth (UK) and also the potential for some very high growth, but with some very high risk (EM/Small Cos).

On the flip side, by reducing your global allocation to introduce the above, you will sacrifice an element of the global allocation. That typically means the biggest exposure reduction will be to the US market, currently dominated by growth stocks. So if these continue to outperform like they have done for the last four years, the act of introducing EM/UK etc will act as a drag on your portfolio. Yet these US growth stocks are very expensive, so there's every chance their outperformance is in the rear view mirror. In that scenario shifting away from that allocation to other areas will have been a good move.

These things can only be answered in hindsight though. EM/UK may outperform US. It may not. No one knows.

What I would say is your new proposal is likely, albeit not guaranteed, to increase your volatility - ie, the range your funds go up or down on any given day in £ terms will increase. EM funds are dominated by Chinese stocks which are about as volatile as you can get at the moment, and the UK is still forging the relationship with the EU which can lead to further risk-off sentiment even if we're passed the worst of it now. 

So this is precisely the reason I went 100% into US plan. The Chinese market seemed to volatile and the UK markets felt a little premature with Brexit etc.

Perhaps I should take small companies off the menu. Curiously Max, how is your portfolio split?

sho_me_da_money

kuratowski said:

Global developed world includes UK, at about 4%, in line with the UK's market capitalization.  On average, loosely speaking, UK investors do tend to invest a greater proportion into UK listed stocks than their market weight - this is called being overweight the UK.  There isn't a right or wrong answer here.  In the past decade, being overweight the UK has given worse returns.  In the decade before that, it would have given better returns.  Nobody knows what will happen in the future.

If you are going with global developed world, you don't need to add UK as a separate fund, unless you want to overweight.  If you use world ex UK then you do want to add UK, otherwise you have no UK exposure at all.

Some potential portfolio configurations might be:

90% global developed world + 10% emerging markets

85.5% global developed world + 9.5% emerging markets + 5% smaller companies

70% world ex UK + 20% UK + 10% emerging markets

66.5% world ex UK + 19% UK + 9.5% emerging markets + 5% smaller companies

This is brilliant thank you mate. I quite like these splits:

70% world ex UK + 20% UK + 10% emerging markets

66.5% world ex UK + 19% UK + 9.5% emerging markets + 5% smaller companies

Or

80% global developed world + 10% emerging markets + 5% smaller companies

There's no right or wrong answer here but would love to learn how Max, Ex Pat would split. I call out these two as they tripled their funds in a short space of time so keen to learn how they have their funds split.