SIPP Transfer Strategy

[Deleted User]

60/40 portfolio goes back to AT LEAST 1949.  Has been declared dead many times but somehow does ok again and again.  

 

Spoony1908

Thanks all, really good to see the perspectives.

For my risk level, I'm still nearer 60/40 than 100 equities! Having said that I have around £50k in a S&S ISS which is more 'adventurous' and I will be putting a fair amount/near max into that each year as well. 

jamesd

We do partially know the future most of the ten year return expectation is explained by the initial cyclically adjusted price/earnings ratio. So in markets like the US where that's very high compared to its historic average we can know that expected equity returns are lowered.

This doesn't mean don't invest, just that avoiding those specific markets or underweighting them is likely to deliver better results at the moment. If using just one global fund that means higher bond weighting, but just one fund is far from ideal in this sort of situation.

[Deleted User]

^This is CAPE. In practice CAPE has been a poor predictor of the future ever since it was introduced. https://www.bloombergquint.com/view/cape-has-a-dismal-record-as-predictor-of-stock-performance

Indeed, the person behind the theory keeps modifying his metric and says that high CAPE isn’t a good reason to avoid US stocks. 

Nobody “knows” the future. 

jamesd

Yes, its CAPE which has a long term record as a good predictor of ten year returns and a -0.74 correlation with safe withdrawal rates. Negative meaning high CAPE implies lower returns. It's imperfect and there have been assorted tweaks suggested by others that improve the performance.

Back in May 2020 '"Valuations are fed more by imagination and wishful thinking than normal," Shiller said.' Shiller being the person who came up with CAPE.

You might find the contrasting views of Shiller and Siegel here of interest.

It's still the case that nobody knows the future, just when conditions are more or less favourable.

[Deleted User]

The problem with CAPE and other prediction tools is that they work wonderfully for the period preceding their development. Academics can mine data. However, if you look at the period of 25 years after CAPE was developed, we find that it didn’t work. 

jamesd

That isn't quite true because there have been dips showing improved value, notably in 2020.

It definitely worked for the dotcom crash and that's around the start of the 25 year period. It also worked for the 2020 covid-19 drop and recovery to at least some extent, signalling high then improved value.

Long term from April 2009 to the start of March 2020 markets in many places have been greatly stimulated by a wide range of fiscal easing measures, producing a long bull run which arguably isn't over yet in spite of 2020 in various places and the earlier UK dip.

What  it definitely isn't useful for is shortish term market timing. That dotcom signal was arguably active for around three years before the crash.