Best allocation across Cash, Bonds & Equities?

dunstonh

allanm02 said:

Thrugelmir said:

allanm02 said:

 I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too). 

Bonds is a very broad term that encompasses a variety of sub asset classes. What are you holding in your portfolio? 

2 managed funds - Baillie Gifford Investment Grade and IG Long funds, plus a passive Vanguard Investment Grade index tracker. Absolutely no science went into those choices!

So, you are not actually holding any low risk bonds.  All pretty much low/medium to medium.

Most people hold bonds to reduce the volatility.  The ratio of bonds to equities would reflect the target volatility they are after.  If you are using bonds at the upper end of the scale relative to other bonds then you would have to hold more bonds and less equities.  Whereas if you hold more defensive bonds, you could hold more in equities.

[Deleted User]

allanm02 said:

I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too).

Why are you worried about stock dips? I suppose you are not all that worried with just 10% in bonds. 

To me, the concern is a major event with companies going bankrupt and long term consequences and bear markets.  And for these scenarios we want government bonds, ideally held directly as opposed to via a fund.  

fineclaret

Deleted_User said:

allanm02 said:

I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too).

Why are you worried about stock dips? I suppose you are not all that worried with just 10% in bonds.

Right, I'm not that worried. So it's more a just-in-case to tide me over. There may of course be a massive readjustment coming - especially if perpetual growth becomes unsustainable, as eventually it must. But (bearing in mind past performance is no guarantee and all that), all the historic dips have been blips.

fineclaret

dunstonh said:

allanm02 said:

Thrugelmir said:

allanm02 said:

 I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too). 

Bonds is a very broad term that encompasses a variety of sub asset classes. What are you holding in your portfolio? 

2 managed funds - Baillie Gifford Investment Grade and IG Long funds, plus a passive Vanguard Investment Grade index tracker. Absolutely no science went into those choices!

So, you are not actually holding any low risk bonds.  All pretty much low/medium to medium.

Most people hold bonds to reduce the volatility.  The ratio of bonds to equities would reflect the target volatility they are after.  If you are using bonds at the upper end of the scale relative to other bonds then you would have to hold more bonds and less equities.  Whereas if you hold more defensive bonds, you could hold more in equities.

I'm less interested in overall portfolio volatility than in limiting the extent of cashing-in of fallen stocks for income. Of course, my bonds showed a Covid dip, parallel with equities, so they clearly aren't 'dip-proof' themselves, and the strategy may fall short in certain market conditions. 

[Deleted User]

allanm02 said:

Deleted_User said:

allanm02 said:

I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too).

Why are you worried about stock dips? I suppose you are not all that worried with just 10% in bonds.

Right, I'm not that worried. So it's more a just-in-case to tide me over. There may of course be a massive readjustment coming - especially if perpetual growth becomes unsustainable, as eventually it must. But (bearing in mind past performance is no guarantee and all that), all the historic dips have been blips.

Guess it depends on your time horizon but we’ve had decades which looked very grim for an equity investor.  And company bonds might not provide much help in that scenario. 

Thrugelmir

allanm02 said:

Deleted_User said:

allanm02 said:

I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too).

Why are you worried about stock dips? I suppose you are not all that worried with just 10% in bonds.

all the historic dips have been blips.

When you think you've experienced it all, you come to realise that you haven't. 

fineclaret

Thrugelmir said:

allanm02 said:

Deleted_User said:

allanm02 said:

I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too).

Why are you worried about stock dips? I suppose you are not all that worried with just 10% in bonds.

all the historic dips have been blips.

When you think you've experienced it all, you come to realise that you haven't. 

Which vague aphorism can be applied to pretty much anything. I'm well aware I could be proven wrong by events. The same could apply to those with large proportions sunk in government securities.

fineclaret

Deleted_User said:

allanm02 said:

Deleted_User said:

allanm02 said:

I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too).

Why are you worried about stock dips? I suppose you are not all that worried with just 10% in bonds.

Right, I'm not that worried. So it's more a just-in-case to tide me over. There may of course be a massive readjustment coming - especially if perpetual growth becomes unsustainable, as eventually it must. But (bearing in mind past performance is no guarantee and all that), all the historic dips have been blips.

Guess it depends on your time horizon but we’ve had decades which looked very grim for an equity investor.  And company bonds might not provide much help in that scenario. 

If, 30 years ago, I had decided that the subsequent 3 decades were going to be such a period, I'd be less comfortable than I am now. Even though 2007 took a long time to get past. We're only right in hindsight. I only need to worry about the graph at the moment I buy and the moment I sell, and only for the fraction involved in those transactions. I'm not going to beat myself up over portfolio-wide paper losses.

[Deleted User]

allanm02 said:

Deleted_User said:

allanm02 said:

Deleted_User said:

allanm02 said:

I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too).

Why are you worried about stock dips? I suppose you are not all that worried with just 10% in bonds.

Right, I'm not that worried. So it's more a just-in-case to tide me over. There may of course be a massive readjustment coming - especially if perpetual growth becomes unsustainable, as eventually it must. But (bearing in mind past performance is no guarantee and all that), all the historic dips have been blips.

Guess it depends on your time horizon but we’ve had decades which looked very grim for an equity investor.  And company bonds might not provide much help in that scenario. 

If, 30 years ago, I had decided that the subsequent 3 decades were going to be such a period, I'd be less comfortable than I am now. Even though 2007 took a long time to get past. We're only right in hindsight. I only need to worry about the graph at the moment I buy and the moment I sell, and only for the fraction involved in those transactions. I'm not going to beat myself up over portfolio-wide paper losses.

30 years ago you had a very different timeline and capacity to handle volatility. 30 years ago major and prolonged market drops worked in your (and my) favour. 

2007/08 wasn’t all that bad compared to some of the other periods we’ve seen in the history of markets. There was a swift turnaround. 1930s and 1970s were far more problematic for older people who were invested and approaching retirement.  And 2000 more recently but to a lesser extent.  

Thrugelmir

Deleted_User said:

allanm02 said:

Deleted_User said:

allanm02 said:

Deleted_User said:

allanm02 said:

I have about 10% (of a 500k pot) in bonds, whose main purpose is to be liquidised during a substantial stock dip (of course, they can go down too).

Why are you worried about stock dips? I suppose you are not all that worried with just 10% in bonds.

Right, I'm not that worried. So it's more a just-in-case to tide me over. There may of course be a massive readjustment coming - especially if perpetual growth becomes unsustainable, as eventually it must. But (bearing in mind past performance is no guarantee and all that), all the historic dips have been blips.

Guess it depends on your time horizon but we’ve had decades which looked very grim for an equity investor.  And company bonds might not provide much help in that scenario. 

If, 30 years ago, I had decided that the subsequent 3 decades were going to be such a period, I'd be less comfortable than I am now. Even though 2007 took a long time to get past. We're only right in hindsight. I only need to worry about the graph at the moment I buy and the moment I sell, and only for the fraction involved in those transactions. I'm not going to beat myself up over portfolio-wide paper losses.

30 years ago you had a very different timeline and capacity to handle volatility. 30 years ago major and prolonged market drops worked in your (and my) favour. 

30 years ago, investors were analysing and reeling from how wrong they had got the Japanese market.