Working out % Equity allocation

pip895

Deleted_User said:

Houses and rentals would be classified as “illiquid assets”.  REIT is really equity under “liquid assets”. “Wealth preservation” is not an asset class but a marketing term.  You should X-ray the fund to figure out your asset allocation.  

Wealth preservation is my term to cover a range of funds & trusts which have wealth preservation as part of there core mandate.  I have picked them based on there relative success in achieving that end in the past. I am well aware that past success is no guarantee that they will all perform well in the future - which is why there are four rather than just one.   
They are bond alternatives - if bond/gilt yields improve I may well transfer to bonds/gilts but until that time I prefer these.  Many use complex arrangements - derivatives etc. to achieve their aims I don't think analysing them to work out the equity/fixed interest in them would help even if the x-ray tools could do it which on the whole they can't.

pip895

Deleted_User said:

When I have DB income (including state pension), I am thinking of including it in the overall asset allocation as well.  Will probably just do a fairly random x25 annual DB income and use it as “fixed income” portion of the portfolio.  In fact, there is an argument for doing it now and then discounting by 6% per annum to reflect the number of years left.  

But only the asset allocation within the liquid portion of my net worth can be accurately tracked and rebalanced.  

This makes sense - I will probably attempt the same -Thanks

[Deleted User]

pip895 said:

Deleted_User said:

Houses and rentals would be classified as “illiquid assets”.  REIT is really equity under “liquid assets”. “Wealth preservation” is not an asset class but a marketing term.  You should X-ray the fund to figure out your asset allocation.  

Wealth preservation is my term to cover a range of funds & trusts which have wealth preservation as part of there core mandate.  I have picked them based on there relative success in achieving that end in the past. I am well aware that past success is no guarantee that they will all perform well in the future - which is why there are four rather than just one.   
They are bond alternatives - if bond/gilt yields improve I may well transfer to bonds/gilts but until that time I prefer these.  Many use complex arrangements - derivatives etc. to achieve their aims I don't think analysing them to work out the equity/fixed interest in them would help even if the x-ray tools could do it which on the whole they can't.

“Wealth preservation” funds as “bond alternative” = self-deception.  I understand your concerns about bonds but if you think that a marketing gimmick has anything to do with asset allocation then you are kidding yourself. 

bostonerimus

pip895 said:

bostonerimus said:

You should consider your finances holistically and a retirement income portfolio starts with a budget and seeing how much income you need to generate. That will guide the organization of your portfolio and how much risk you take on. Also, can you afford a second property that is going to lock up capital?

I have spent quite a bit of time trying to work out a budget and overall plan - or rather correct the original one - there are just so many uncertainties. 

We will retain about 2 years spending in cash/PB even after purchasing the property - so I guess its affordable.  Its actually only half a property as I am purchasing it with my sister, we wont be taking out a mortgage.  The property in question belongs to a mutual friend who desperately needs to move as its an upstairs flat and she is struggling to get up the stairs.  She hasn't been able to sell as there is an empty shop downstairs - been empty for some time.  The most likely outcome is that it will be converted to residential but as it stands no one can get a mortgage on the flat because of it.  There is quite a shortage of lettable property locally so we will have no difficulty renting it out and even if we were to use an agent (which we won't) the returns would be pretty good.        

I'm a fan of rental property as it has done well for me and now provides half of my retirement income. I kept things simple and have a flat on the ground floor of my home and I live upstairs so fixing things and managing the place is easy. I think its critical that you are a cash buyer and a mortgage won't be involved. It's nice that you are looking to help a friend, but don't let that influence your judgement, I'd also avoid a leasehold property and I'd be careful with buying a flat above an empty shop as you don't know what will happen there. It seems that this will not be a large fraction of your capital, but I do query buying with another person, even a relative.

Canuck01

Hi Pip...It does seem you are struggling to figure out if the property investment is a good thing to do at the present time.  It seems like a quite complex investment if people would struggle to get a mortgage on it, plus buying from a friend etc.  I remember reading a book on real estate investment once and the advice that stuck with me was something like.  'Never forget all of the value of your investment is realized when you first purchase that property'.  The more research and thought you put into this the better, before you part with your hard earned cash.

Albermarle

pip895 said:

Well I have taken your advise (there seemed to be a definite consensus on keeping it simple) and removed investment properties and external cash/PB. More than 2 years cash will be retained outside the portfolio even after the proposed property purchase. What I am left with inside the SIPPs and ISAs is this:-

So 70% Equity 30% Other.  I justify ignoring the % equity within "Wealth Preservation" because as a group they have less correlation with equity than say medium duration corporate bonds.  Does that seem reasonable?  

I do not think you should leave external cash/PBs out of this , just because they are not in a tax wrapper.
As another poster has said , you should include all liquid assets in my opinion.

Albermarle

Deleted_User said:

pip895 said:

Deleted_User said:

Houses and rentals would be classified as “illiquid assets”.  REIT is really equity under “liquid assets”. “Wealth preservation” is not an asset class but a marketing term.  You should X-ray the fund to figure out your asset allocation.  

Wealth preservation is my term to cover a range of funds & trusts which have wealth preservation as part of there core mandate.  I have picked them based on there relative success in achieving that end in the past. I am well aware that past success is no guarantee that they will all perform well in the future - which is why there are four rather than just one.   
They are bond alternatives - if bond/gilt yields improve I may well transfer to bonds/gilts but until that time I prefer these.  Many use complex arrangements - derivatives etc. to achieve their aims I don't think analysing them to work out the equity/fixed interest in them would help even if the x-ray tools could do it which on the whole they can't.

“Wealth preservation” funds as “bond alternative” = self-deception.  I understand your concerns about bonds but if you think that a marketing gimmick has anything to do with asset allocation then you are kidding yourself. 

I personally do not see the very well established Wealth Preservation funds in the UK ( Personal assets , Capital Gearing etc ) as just a marketing gimmick . They are actively managed funds with a very clear remit . Preservation of Capital as a priority , modest long term growth above inflation as a secondary objective . They are not particularly expensive, and they have so far proved themselves in difficult market conditions.
You are right of course that they are not an asset class in themselves though.

RoadToRiches

17% for the UK is way too much in my opinion and nothing for the powerhouse of the USA

pip895

Albermarle said:
 

I do not think you should leave external cash/PBs out of this , just because they are not in a tax wrapper.
As another poster has said , you should include all liquid assets in my opinion.

 I am leaving them out purely because after the property purchase they will only be just over 2 years investment income so an emergency buffer really.

pip895

RoadToRiches said:

17% for the UK is way too much in my opinion and nothing for the powerhouse of the USA

Within the 30% Global about 60% is USA  - this category includes technology through ATT, SMT and others but the bias away from the US is deliberate.