Once you've "won the game"

uk1

michaels said:

Albermarle said:

uk1 said:

waveydavey48 said:

I've read the expression "once you've won the game why keep playing" in relation to investing and it seems to refer to the situation where someone has invested long and well enough to be in the position where they have enough money to achieve their objectives, and the advice is that they should now de-risk. In other words why keep exposing your money to the vagaries of the market when you don't need to.
What happens next?
Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

Inflation will be 6% plus by early next year - a few years like that and you must have started with a very big pot it not to be a problem - 6% inflation = a 6% investment loss.  Personally I couldn't live with that level of risk.

But that might not be the right advice for someone who is older than you and wealthier than you.  The point is that one view isn't right for all and the place of advice is to offer thoughts for the widest.  Some mistankly believe that their view is the view that is right for everyone.

uk1

Albermarle said:

uk1 said:

waveydavey48 said:

I've read the expression "once you've won the game why keep playing" in relation to investing and it seems to refer to the situation where someone has invested long and well enough to be in the position where they have enough money to achieve their objectives, and the advice is that they should now de-risk. In other words why keep exposing your money to the vagaries of the market when you don't need to.
What happens next?
Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

One of the other aspects of having "more than enough" is that it enables you to think about how you might acquire indulgences earlier to enjoy later in  life.  That might be a boat, a property or in times gone by even purchasing airline miles in order to use for first class travel using credit card 241's.  Whilst the number of people who have "more than enough" is very small I suspect that a very high percentage of those that do, have never even dared to think and therefore do not know that this is their situation.  Hence they make decisions based on doing risky things they don't know that they needn't do.  The art "may" be for you to conspire and plan to have a zero asset balance when you and your loved one pops their clogs rather than have as much as you have today because you have protected it from inflation for example. 

On your death-bed - if you are unlucky enough to be blessed with perfect 20/20 hindsight you may conclude  that all you have done is acquired more stress, and neglected self-indulgance for yourself and those you love and genoristy through your life simply to give the government more IHT later  on down the line.

Some voddy and clarity of more extrem thought earlier sometimes even seems sensible when you sober up.

bostonerimus

uk1 said:

bostonerimus said:

uk1 said:

waveydavey48 said:

I've read the expression "once you've won the game why keep playing" in relation to investing and it seems to refer to the situation where someone has invested long and well enough to be in the position where they have enough money to achieve their objectives, and the advice is that they should now de-risk. In other words why keep exposing your money to the vagaries of the market when you don't need to.
What happens next?
Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

I agree that a simple financial plan could well lower your blood pressure and stress levels and extend your life. I wonder if the actuaries factor that into their annuity rates ;-) ...ie people who buy annuities live longer because they buy annuities.
Seriously though most people are going to need some speculation in their retirement plan because they will need some growth to keep up with inflation. Index linked annuities are a guaranteed way to do that, but they are expensive, Government index linked bonds are also an option. You could get more from stocks but with added risk. But if you've "won the game" all that becomes irrelevant because whatever you do you will be ok. I just becomes a game of how much will you leave to your heirs.

Exactly.  And isn't it possible to be fools gold?  How much will you be permited to leave your heirs past your spouse?  If you joined the dots and realised that your spouse will have more than enough and then it's what's left to the kids then you might drink some more voddy and shrug and say my main job is actually to spend what I have rather than fret about protecting and increasing it. More people could then actually tell their wives to spend more whilst they share a life together.  Who does?  But that is another topic that normally invites some flak .....

My motivation for trying to leave money has grown ever since I got grand nieces and nephews. I want to help them with things like school and houses and I'm giving them money already in part to keep the estate below inheritance tax thresholds. I'm just not a big spender.

uk1

bostonerimus said:

uk1 said:

bostonerimus said:

uk1 said:

waveydavey48 said:

I've read the expression "once you've won the game why keep playing" in relation to investing and it seems to refer to the situation where someone has invested long and well enough to be in the position where they have enough money to achieve their objectives, and the advice is that they should now de-risk. In other words why keep exposing your money to the vagaries of the market when you don't need to.
What happens next?
Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

I agree that a simple financial plan could well lower your blood pressure and stress levels and extend your life. I wonder if the actuaries factor that into their annuity rates ;-) ...ie people who buy annuities live longer because they buy annuities.
Seriously though most people are going to need some speculation in their retirement plan because they will need some growth to keep up with inflation. Index linked annuities are a guaranteed way to do that, but they are expensive, Government index linked bonds are also an option. You could get more from stocks but with added risk. But if you've "won the game" all that becomes irrelevant because whatever you do you will be ok. I just becomes a game of how much will you leave to your heirs.

Exactly.  And isn't it possible to be fools gold?  How much will you be permited to leave your heirs past your spouse?  If you joined the dots and realised that your spouse will have more than enough and then it's what's left to the kids then you might drink some more voddy and shrug and say my main job is actually to spend what I have rather than fret about protecting and increasing it. More people could then actually tell their wives to spend more whilst they share a life together.  Who does?  But that is another topic that normally invites some flak .....

My motivation for trying to leave money has grown ever since I got grand nieces and nephews. I want to help them with things like school and houses and I'm giving them money already in part to keep the estate below inheritance tax thresholds. I'm just not a big spender.

You post demonstrates how one idea doesn't fit all. 

MK62

My motivation is that my kids will probably never be able to benefit from the steep rises in house prices and stock market returns that we have enjoyed......so we are happy to share with them what we reasonably can......but that doesn't go as far as us living in penury to do it......😉

bostonerimus

waveydavey48 said:

Many thanks for the further, interesting replies to my original post.

I think the answer for me is to remain invested in a multi-asset fund but dial down the percentage of equities. There are different views on whether the remainder should be bonds, cash or something else.  

Many forum members are not fans of bonds but Vanguard continue to advocate them in their lifestrategy products. I know some people are pretty dismissive of Vanguard but they do seem to know what they are talking about and if bonds are such a bad idea it's surprising they continue to advocate them.    

The multi-asset funds from Vanguard are good solid products as are the many alternatives from iShares etc. I use Vanguard in the US and I'm very happy with them. They have a lot more funds and products than their UK operation and really are "full service", they even sell annuities, UK Vanguard doesn't. I've looked an Vanguard's US annuities and they are competitive, but if I want an annuity I will buy from TIAA-CREF as I get preferential rates. Part of the problem with annuities is knowing where to buy one and making sure they are not loaded up with fees. So in the UK maybe start with your pension provider, then look at other insurance companies and it might be a good idea to check with an IFA.

Linton

waveydavey48 said:

Many thanks for the further, interesting replies to my original post.

I think the answer for me is to remain invested in a multi-asset fund but dial down the percentage of equities. There are different views on whether the remainder should be bonds, cash or something else.  

Many forum members are not fans of bonds but Vanguard continue to advocate them in their lifestrategy products. I know some people are pretty dismissive of Vanguard but they do seem to know what they are talking about and if bonds are such a bad idea it's surprising they continue to advocate them.    

Vanguard continue to use safe bonds in their lifestrategy products because that is how their lifestrategy products are defined.  Funds should keep to their remit through good and bad times. That is not an endorsement by Vanguad of the use of bonds in current circumstances.

If you are wanting a fund that makes judgements on if, how, and when bonds should be used in a targetted portfolio you need to lock at the Wealth Preservation and Absolute Return funds who have the remit to change their allocations as they feel appropriate. Or you could go for one of the risk-targetted multi-asset funds which may have the same freedom.

uk1

MK62 said:

My motivation is that my kids will probably never be able to benefit from the steep rises in house prices and stock market returns that we have enjoyed......so we are happy to share with them what we reasonably can......but that doesn't go as far as us living in penury to do it......😉

An option depending on your plans might be to allow them to use the equity in your home towards their own property.

Oddly the older I get the more "socialist" I feel I am becoming.  I feel bad that much of my wealth creation that has enriched me has been at the cost of affordable housing and I'd like for us to conspire that housing, food and warmth should be affordable to all. But  I'm just getting confused.

cfw1994

michaels said:

Albermarle said:

uk1 said:

waveydavey48 said:

I've read the expression "once you've won the game why keep playing" in relation to investing and it seems to refer to the situation where someone has invested long and well enough to be in the position where they have enough money to achieve their objectives, and the advice is that they should now de-risk. In other words why keep exposing your money to the vagaries of the market when you don't need to.
What happens next?
Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

Inflation will be 6% plus by early next year - a few years like that and you must have started with a very big pot it not to be a problem - 6% inflation = a 6% investment loss.  Personally I couldn't live with that level of risk.

6%?
A confident prediction.   As the great Paul Gascoigne put it, "I never predict anything, and I never will."

I think your guess will be way off the mark, but that is just my guess.   
Well, me & the OECD: https://www.bbc.co.uk/news/business-58638224

I suspect a market 'crash' or indeed market growth will hide that inflation number for most who are invested.   I'm personally on the fences as to which it might be: I think we are still due a correction, but we had one last year and yet things went up 10-20%, YoY.

billy2shots

Touching on an earlier idea, for someone that has amassed their lot and doesn't need to grow their pot further, I have often thought about the following. 

The only job of money invested is to keep pace with inflation (if that's not the only job then you haven't truly won the game). 

You can invest all of it in so called 'lower risk holdings' but let's face it, that risk may still be too high to someone who doesn't need to take further risk. 

The alternative.
 50% cash gaining as much interest as possible whilst the capital remains totally safe. No need to go into detail here but regular savers, PBs etc where the government guarantees it safety, spread across accounts where needed. 

The other 50% is invested. If we take 3% as the average rate of inflation then we have to make an average return of 6% on that money (only 50% invested remember so it has to yield twice the return of inflation). 

The historic average return of the stock market before taking inflation into account is up around 10%. 

Is hitting 6%  really that unthinkable? I think not. 

It gets better, that cash invested might be returning you 1% pre inflation meaning the 50% invested portion now only needs to return 5% to keep up with the average rate of inflation. 

For any normal year you would withdraw half your annual income from your cash and the other half from the invested pot. 
Stock market down years would see you only take from cash. Better returning years would see you take more from the investment side to rebalance the cash towards a 50/50 weighting once again. 


It's really simple so probably heavily flawed but sometimes reading on here and other investing forums, people try so hard to overcomplicate things.