Is MyMap3 / Lifestrategy20 a substitute for cash savings

masonic

Deleted_User said:

Albermarle said:

OP - In summary , you are concentrating too much on the 20% equity . The 80% non equity can also go down and due to market conditions this is a distinct possibility . It can be argued that VLS 40 ( or similar ) could actually be a safer bet.

As a rule of thumb, an equities crash can be up to 50% loss, and a bonds crash up to 10%. Which suggests that, with an 20%/80% fund, you're taking about the same risk (of short-term losses) on the bonds side as on the equities side.

I suspect the figure for bonds is too low in the current climate. There was a thread recently from someone with remorse over buying VGOV, which is currently 12.5% down from its all time high in May 2020. With its long duration it could have considerably further to fall. There would have been some income in that time, but the loss would still be in excess of 10%, and I sense nobody is feeling like UK Gilts are now cheap.

Thrugelmir

masonic said:

Deleted_User said:

Albermarle said:

OP - In summary , you are concentrating too much on the 20% equity . The 80% non equity can also go down and due to market conditions this is a distinct possibility . It can be argued that VLS 40 ( or similar ) could actually be a safer bet.

As a rule of thumb, an equities crash can be up to 50% loss, and a bonds crash up to 10%. Which suggests that, with an 20%/80% fund, you're taking about the same risk (of short-term losses) on the bonds side as on the equities side.

There was a thread recently from someone with remorse over buying VGOV, which is currently 12.5% down from its all time high in May 2020. 

Ouch. You have to question if they understood what they were buying. 

masonic

Thrugelmir said:

masonic said:

Deleted_User said:

Albermarle said:

OP - In summary , you are concentrating too much on the 20% equity . The 80% non equity can also go down and due to market conditions this is a distinct possibility . It can be argued that VLS 40 ( or similar ) could actually be a safer bet.

As a rule of thumb, an equities crash can be up to 50% loss, and a bonds crash up to 10%. Which suggests that, with an 20%/80% fund, you're taking about the same risk (of short-term losses) on the bonds side as on the equities side.

There was a thread recently from someone with remorse over buying VGOV, which is currently 12.5% down from its all time high in May 2020. 

Ouch. You have to question if they understood what they were buying. 

They didn't buy at that high, they bought about 3 months ago and only crystallised a 4-5% loss, having decided to bail. Certainly learning opportunity, but it could have been worse for them.

masonic

Deleted_User said:

masonic said:

Deleted_User said:

Albermarle said:

OP - In summary , you are concentrating too much on the 20% equity . The 80% non equity can also go down and due to market conditions this is a distinct possibility . It can be argued that VLS 40 ( or similar ) could actually be a safer bet.

As a rule of thumb, an equities crash can be up to 50% loss, and a bonds crash up to 10%. Which suggests that, with an 20%/80% fund, you're taking about the same risk (of short-term losses) on the bonds side as on the equities side.

I suspect the figure for bonds is too low in the current climate. There was a thread recently from someone with remorse over buying VGOV, which is currently 12.5% down from its all time high in May 2020. With its long duration it could have considerably further to fall. There would have been some income in that time, but the loss would still be in excess of 10%, and I sense nobody is feeling like UK Gilts are now cheap.

Perhaps, but IMHO it's still in the right area - i.e. a big fall for bonds is still a smaller percentage than a big fall for shares.

Looking at people buying at the all-time high is a bit like looking at people buying at the all-high for equities. Most people build their investments up gradually over time.

And gilts are not so attractive as an investment by themselves, but as something that complements equities. In May 2020, gilts were up and equities were down - well, it was a couple of months after equities' lowest point in the Covid crash; investors with a mixed portfolio would hopefully have been rebalancing by selling bonds and buying equities some time around March-May 2020. And might have done the opposite about a year later. So the role of gilts in rebalancing has worked out fine over this period in which they haven't done so well as a stand-alone investment.

Equity crashes are always taken from peak to trough, so it is only fair to do likewise for bonds. Otherwise you are not comparing like for like. I agree with you that their utility is in balancing and reducing volatility in a multi-asset portfolio, and for that purpose the volatility has its value.