Best allocation across Cash, Bonds & Equities?

fineclaret

I started investing in 1987. Got burnt in the crash, decided it was a mug's game. But I kept dripping a bit into ISAs without really taking much notice of performance, and discovered I'd done OK out of dips. Longer term, you'd hardly even notice 87 on a chart. That's all I mean by 'blip'; I'm well aware how painful it can be when you're in the middle, or if you lost the farm. We're specifically talking stocks, cash and bonds here, not property or anything high-risk. 

I do think stocks are over inflated. Been thinking it for a while, which is why I'm not putting new cash in, and have withdrawn some (to watch them continue improbably to soar!). But it will likely adjust to a level which, had I not been aware of the heights reached by the graph, I'd probably have been OK with. I'm not after 10%. And it's only a problem for the stock I actually sell in any case. The kind of long term downturn that would make a mockery of my approach, I think will come if at all from external factors - pestilence, famine, climate, energy, war. I put those in the same bracket as terminal cancer diagnoses: barely likely to be offset by the knowledge I had limited my downside in gilts! When the crash comes is important. If soon, I hope I've still got 30 years in me. If 30 years hence, who cares? 

squirrelpie

allanm02 said:

When the crash comes is important. If soon, I hope I've still got 30 years in me. If 30 years hence, who cares? 

Sadly, predicting the timing of a crash or any other event is the most difficult part! The last thing I read that I remember predicted that the next long-awaited crash will come in 2024. So well before your 30-year deadline, but not next week either. This recollection is worth exactly what you paid for it

[Deleted User]

The “danger time” is immediately prior to or soon after retirement.

For young investors the main risk isn’t the bear market and its impact on portfolios but that some may decide “its a mug’s game”. 

fineclaret

Deleted_User said:

The “danger time” is immediately prior to or soon after retirement.

For young investors the main risk isn’t the bear market and its impact on portfolios but that some may decide “its a mug’s game”. 

Heh. I certainly could have done better by being a bit more aware that dips are useful! I'm much more exposed now, but part of that exposure is in the gains I've made - not through being wise, but through being regular (as it were).

Albermarle

squirrelpie said:

allanm02 said:

When the crash comes is important. If soon, I hope I've still got 30 years in me. If 30 years hence, who cares? 

Sadly, predicting the timing of a crash or any other event is the most difficult part! The last thing I read that I remember predicted that the next long-awaited crash will come in 2024. So well before your 30-year deadline, but not next week either. This recollection is worth exactly what you paid for it

I think a crash , particularly in the US markets , has been predicted by some for about the last four years.

[Deleted User]

There are talking heads predicting nothing except a crash. And they’ve done it for decades. Every now and then they turn out to be right.

fineclaret

There are attendant risks with moving into quieter waters, of course. I poked around some Gilt funds, and one caught my eye; had I shifted two months ago I would have seen it drop 8% in the same time as the stock fund I'd have moved it out of gained 5%. A net, admittedly notional, 13% cost***. I'd then be better placed for 'the next crash', of course, but it would require active management to strike appropriately and cash in on it. If I just rode that crash out, I don't know what I'd gain, other than a hedge against the one after!

(*** I'm aware this is a peculiarity of funds, but I think they have the advantage of greater liquidity). 

[Deleted User]

Which gilt fund lost 8% over the last 2 months? I have not followed gilts but treasures did not do anything like this. 

That aside, bonds typically have higher risk than shares for someone with a long time horizon.  For retirees they are important though. I prefer short term government bonds bought directly rather than via a fund. We only really need bonds to be liquid at the time of a major crisis and thats the exact time when funds might experience problems.

[Deleted User]

By the way, when the posters here are saying “cash”, do you mean the actual cash sitting within a tax free pension wrapper and earning no interest? 

dunstonh

Which gilt fund lost 8% over the last 2 months? I have not followed gilts but treasures did not do anything like this.

A number of them are running in that ballpark.  Vanguard UK Govt bond is 7% down over 12 months.  Although a gilts crash did occur in that period.

Some global govt bond funds and long dated gilts have just crept into double digit losses.

However, it is worth noting that 2020 saw significant gains way above the typical norm and 2021 saw some of that unwind to bring it back in line with the long term average.