Embarrassed 40 year old - no pension.

MaxiRobriguez

sho_me_da_money said:

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?

Just need to have a think about what suits you - there's no "right" answer.

My portfolio is: 
65% pension (£120k), of which:
- 25% is US 
- 20% Europe
- 20% Small Co's (Active fund)
- 15% EM (Active fund)
- 10% Japan
- 5% UK
- 5% Aus/NZ

35% S+S ISA (£65k), of which:
- 20% is in a global tracker
- 80% are made up of 14 individual stocks - most are UK value stocks. Top holdings are M&G, Boohoo, Unilever.

It's a portfolio which would probably suit <5% of people because of the high allocations to EM/Small/Individual stocks and very deliberate underweighting of the US. I think most sensible commentators on here would advise against such a portfolio.... but I am early 30's on a relatively high income and so I'm comfortable taking risk others would not. For example my S+S ISA dropped about 45% in March 2020 when the Coronavirus pandemic hit which was a lot more than global trackers lost but I could easily ride that out. My plan is to retire at 50. If it goes pear shaped, I'll work an extra few years.

Edit: My contributions in this period outstrip my investment gains. Indeed, a bog standard global tracker in my pension at least would have netted me better gains than the portfolio I have.

ex-pat_scot

sho_me_da_money said:

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.

There's no real magic involved.
My SIPP has all legacy pensions (i.e. predating current employment) - pretty much all is in a simple VWRL global tracker.
My current employment pension doesn't offer Vanguard funds, so I had a range of global funds in broad proportion to the market. Possibly overweight in EM.  I've now found a sensible global tracker, so it is tracking pretty close to VWRL.

I have also maxed out the contributions, as my circumstances have been fortunate to allow me the flexibility to be able to do so.

I am also well aware that the party has rumbled on for longer than I'd anticipated - I'm sure there will be some considerable bumps in the road ahead as the world adapts to the unwinding of QE and furlough, and post-Covid challenges emerge with ongoing rumbles to the economies.

I've kept my nerve in a relatively aggressive (100%) investment strategy, even through the various market corrections and the initial Covid slump. I know plenty of people panicked and liquidated, and have lost out hugely as a result.

Compounding hasn't really had a look in. I could have made much more of an effort earlier in my career, but frankly my earnings and family circumstances meant that I wasn't really able.  Had I done so, and kept my nerve through the previous recessions, then I'd be absolutely flying...

sho_me_da_money

I noted both of you guys mentioned 'Global Tracker' is this different from the 'Global or World Equity' products available to me? Of the list I showed in the screenshot earlier, do I have any good Global Tracker options to go for?

Honestly speaking, I have zero idea what the best funds are for me. I kinda wish I had you two as an IFA that would apply the sense and knowledge you have. 

Also noticed people talk about VANGARD a lot. Who are they? Something i should consider throwing my money into? I dont think i can put my pension money in but perhaps I can use that as an efficient savings pot?

Alexland

sho_me_da_money said:

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

That's roughly the allocation we have held since overweighting the UK towards the end of last year. Home bias provides both sector and valuation diversification against the high proportion of expensive US tech found in most global index trackers. However the UK market contains many companies that frankly have very poor future prospects so it has been worth paying for some active management to filter on reasonably valued, high quality companies with good growth potential. According to the Trustnet Chart Tool our mostly UK investment trust has provided a higher total return than the FTSE 100, World and All-World since purchase.

Jonesy1977

sho_me_da_money said:

I noted both of you guys mentioned 'Global Tracker' is this different from the 'Global or World Equity' products available to me? Of the list I showed in the screenshot earlier, do I have any good Global Tracker options to go for?

Honestly speaking, I have zero idea what the best funds are for me. I kinda wish I had you two as an IFA that would apply the sense and knowledge you have. 

Also noticed people talk about VANGARD a lot. Who are they? Something i should consider throwing my money into? I dont think i can put my pension money in but perhaps I can use that as an efficient savings pot?

You don't need an IFA (they are not going to advise on the underlying assets anyway) and you don't need to overthink your allocations, you simply need to assess your own risk (high/medium/low)  at your age medium high is fine as it is a long way off until you access your pension.  I suggest you watch some of the YouTube Content by the excellent Ramin Nakisa of Pensioncraft his explainer videos are really good (if a little technical at times) this is literally all you need to know.   As your company pension is Sal Sac - don't worry about SIPPs and you wont be able to access Vanguard if you stick with the company pension and get teh benefits of salary sacrifice (which is Great!), however you may find that some of the underlying funds at LG are infact Vanguard (or BlackRock or Fidelity etc)  Pick your fund for year and forget, review later when you know more and tinker if you feel like it.  Otherwise just accumulate :-).....................where you put your money is for another day IMO.   

kuratowski

sho_me_da_money said:

I noted both of you guys mentioned 'Global Tracker' is this different from the 'Global or World Equity' products available to me? Of the list I showed in the screenshot earlier, do I have any good Global Tracker options to go for?

Yes: your L&G MT global developed equity index fund is a global tracker.  The terms "world" and "global" are often used to mean developed markets only (e.g. MSCI World Index) and often small cap is excluded so that's why people have been suggesting various combinations of different trackers.
As I mentioned earlier a global tracker will have only a small UK allocation, if you want to increase this, going overweight, then going world ex UK with a separate UK tracker is the answer.

sho_me_da_money

Lads im done. 

Let the games begin.

MaxiRobriguez

Good luck. I think that's a fine allocation for a relative novice with a long term view.

Alexland

kuratowski said:

Yes: your L&G MT global developed equity index fund is a global tracker.  The terms "world" and "global" are often used to mean developed markets only (e.g. MSCI World Index) and often small cap is excluded so that's why people have been suggesting various combinations of different trackers.

I tend to see 'Global Tracker' used as a broad term that could cover Developed, All-World, Global All Cap, etc indexes whereas 'World' usually seems to be used to mean Developed only.

kuratowski said:

As I mentioned earlier a global tracker will have only a small UK allocation, if you want to increase this, going overweight, then going world ex UK with a separate UK tracker is the answer.

Maybe a FTSE250 tracker but I wouldn't touch the FTSE100 or All Share with a barge pole. I accept there is some All Share type exposure within my global trackers as a necessary evil but looking down the list of companies I see high street banks, oil and tobacco. While they may provide some diversification they are wasting assets in mostly irreversible decline. Even some well regarded UK investment trusts have been using high weighting to oil and tobacco to support their income so you need to look carefully under the hood.

kuratowski

Good points; within employer pension schemes, often you have to compromise.
I agree with MaxiRobriguez this is a suitable portfolio for starting out, and better than the previous allocation.