My SIPP switch is complete - investment timing question

Sunnylifeover50plan

So my funds arrived on my new platform. I've placed a purchase order for a blend of Vanguard LS40 & LS60 acc funds so that I get close to 50% equity those orders should settle after the bank holiday.

I've currently kept back about 25% in cash and, although I am not trying to time the market, simply because everything seems at all time highs is there any sense in waiting a bit before investing the last 25%? Even if it's just to wait to hear what the Fed says about tapering later today?

Generally it seems best to always be invested and spend time in the market.

What are other's thinking are people holding more cash to perhaps buy on better terms in the near future?

NoMore

"I'm not trying to time the market" proceeds to ask is it ok to try and time the market.

[Deleted User]

“ I've currently kept back about 25% in cash and, although I am not trying to time the market, simply because everything seems at all time highs is there any sense in waiting a bit…”

You do realize that you are contradicting yourself, right?

As a general rule, the earlier you invest the better.  On average stocks go up, so delays lower your probability weighted return.  If the market were to go down its not a big deal, except in extremely rare events.  Unless you are about to retire.  And even then your asset allocation should deal with the risk. Any specific information on the timing and likely nature of the forthcoming Fed announcement is already known to Mr Market and priced in.  And surprise could be possible as well as negative.

Sunnylifeover50plan

I re-invested the majority of it, in keeping with my plan, the same day it hit my new SIPP account yesterday. It was getting late and so I waited until today before addressing the remaining cash balance.

I'd be interested if there is a trend at this time to holding a little more cash than usual, though maybe this is the wrong place to ask.

Albermarle

Sunnylifeover50plan said:

I re-invested the majority of it, in keeping with my plan, the same day it hit my new SIPP account yesterday. It was getting late and so I waited until today before addressing the remaining cash balance.

I'd be interested if there is a trend at this time to holding a little more cash than usual, though maybe this is the wrong place to ask.

I guess you are talking about holding cash to try and capitalise on a stock market drop .
 However there are a few comments on here about a different approach with people holding more cash instead of bonds , which are less attractive than in the past.
In your case that would translate into 50% in a 100% equity investments and 50% in cash
That maybe a bit extreme and probably there is still a place for some bonds , so you could maybe have VLS80 at say 60 or 70% and 30% cash .

This is clearly not stock market timing but a gamble on whether cash or bonds will perform better over the next period.

Alternatively you could invest the remaining funds in areas like infrastructure or commodities , to move away equity , cash or bonds. 

sevenhills

Sunnylifeover50plan said:

I've currently kept back about 25% in cash and, although I am not trying to time the market, simply because everything seems at all time highs is there any sense in waiting a bit before investing the last 25%?

The FTSE all share was 4,257 in Jan 2020 and it's now 4,105; so it's not a all time high, far from it.

[Deleted User]

Sunnylifeover50plan said:

I re-invested the majority of it, in keeping with my plan, the same day it hit my new SIPP account yesterday. It was getting late and so I waited until today before addressing the remaining cash balance.

Doubt is normal but if you have a well thought through plan then you should stick with it. 

Sunnylifeover50plan

I think for now I will reduce my cash to the FSCS limit and lay a little more into the Vanguard blend that I have.

Thanks

MX5huggy

With your current allocation you have 37.5% in Equity the same in Bonds and 25% in Cash. You may as well go all in on LS40.

What’s your plan for rebalancing between the 2 LS holdings?

You’re 3 years from starting drawdown so have you planned this? You’re also presumably hopeful of being invested for another 40 plus. 

I’m holding more bonds (25%) with a plan to move to 15% if a buying opportunity is presented. But I have much less skin in the game. And still adding each month.

Sunnylifeover50plan

MX5huggy said:

With your current allocation you have 37.5% in Equity the same in Bonds and 25% in Cash. You may as well go all in on LS40.

What’s your plan for rebalancing between the 2 LS holdings?

You’re 3 years from starting drawdown so have you planned this? You’re also presumably hopeful of being invested for another 40 plus. 

I’m holding more bonds (25%) with a plan to move to 15% if a buying opportunity is presented. But I have much less skin in the game. And still adding each month.

I reduced my cash about 30 minutes ago so its sitting at around 14% cash in the SIPP cash account the rest evenly split between the VLS40 and 60. I will invest more of the cash but want to have a think about where it goes, it might just go into the two funds that I have.

My current plan is not to take a tax free lump sum, so in 3 years time I will sell down some units and start to pay myself around £16k pa, we already draw down a small amount from my wife's SIPP.

I'm going to observe what happens with the set-up I have over the next few years but the idea is that it's long term and Vanguard takes care of all the rebalancing. I moved to this model as; it's cheaper, the funds seem well represented by others, it still matches my risk appetite and I have much more control with my new SIPP provider/ platform than I did before.

We retain a multi year cash buffer outside the pension wrappers and own our house, in Spain, so we have a safety net of sorts.

MX5huggy

It all sounds well considered.

All the rebalancing I was referring to was between the 2 LS funds which VG won’t do but looking at it if you had done this 5 years ago LS60 would now be at 52% and LS40 at 48% so not exactly out of balance and easily rectified buy selling a bit more of the better performing one.