60/40Mixed Asset Funds

Iain_For

Frequentlyhere said:

I'd say the 60/40 has been a suboptimal choice for many recently, but is now improving rapidly. As others have said, much of the damage has already been done, bonds are already in an historic bear market.

The thing to remember with the bond component, as I see it, is that the Yield to Maturity % is roughly equivalent to what you'll get out of it providing you hold the bond for it's duration, regardless of the dips and crests it will take along the way. If bond prices fall, your yield rises to compensate, providing you don't sell too soon.

If you take an accumulating bond fund like VAGS (Vanguard global), it's YTM is now a shade above 3%. It's still below inflation, but not a bad rate, and it also has the possible benefit of increasing in capital value if equities continue to be hit hard.

So at this point I'd stay the course, if nothing else what better risk-adjusted option is there?

Where did you get the current average YTM from? It’s such a useful parameter.

Iain_For

Thrugelmir said:

The "40 part" has been discussed endlessly for a considerable number of years now. Only when performance dips do many investors take a real interest in what they are invested in. 

True, it could also be argued that it is the perfect opportunity to assess whether a multi-asset fund bought in the lockdown euphoria actually meets an individual’s goals. Nothing against 60/40 like VLS60, used it for years, but having retired 3 years ago there were elements of the fixed interest part that were no longer appropriate for our medium term goals.

Thumbs_Up

I have the VLS 60/40 in my sipp, down about -3%. I have only put in nominal sums of £2880 per annum, and since I won’t be touching this for another 10 years I am not too perturbed.

threlkeld53

For those who are retired but can wait at least 7--10 years before accessing our sipp/Isas, I'm wondering if it's worth selling a chunk of VLS60 and/or any other 60:40 fund.

Then to put 60% of the sale value into an index fund and the remaining 40% into a one year fixed term account @ 2%-2.5%. 

tebbins

ChainsawCharlie said:

So we haven't arrived at a point where a 10 years plus investor would be better in cash than a 60/40 VLS?

It depends how equities perform and how high cash savings rates rise (if they even do) over that period. It is perfectly possible, but the longer the period, the more you would expect the 60/40 to outperform. The bonds in most 60/40-ish multi-asset funds will have an average maturity of less than 10 years, so after 10 years at least half will have been replaced by newer, possibly/probably higher yielding bonds.

Iain_For

threlkeld53 said:

For those who are retired but can wait at least 7--10 years before accessing our sipp/Isas, I'm wondering if it's worth selling a chunk of VLS60 and/or any other 60:40 fund.

Then to put 60% of the sale value into an index fund and the remaining 40% into a one year fixed term account @ 2%-2.5%. 

I think that depends on what your other assets are and, as you say, the timescale you want to access them on. After I retired I moved from a VLS60 fund to a DIY portfolio for our ISAs with a shorter average bond duration, we already had cash savings making up some 20-25% of our portfolio. There are still some longish bonds in those funds, but overall the average duration is around half that of VLS 60. Maybe just my take, but the long 17-21 year durations of some of the VLS bond funds did not really fit with our envisaged timescales of when we are likely to need the around 2/3 of the money in our ISAs. Should add we're not reliant on these ISAs for normal living costs, though that will depend on how long inflation persists at high levels, oh and the bond part of my DIY portfolio is still down like every else's!

Thrugelmir

Iain_For said:

Thrugelmir said:

The "40 part" has been discussed endlessly for a considerable number of years now. Only when performance dips do many investors take a real interest in what they are invested in. 

True, it could also be argued that it is the perfect opportunity to assess whether a multi-asset fund bought in the lockdown euphoria actually meets an individual’s goals. Nothing against 60/40 like VLS60, used it for years, but having retired 3 years ago there were elements of the fixed interest part that were no longer appropriate for our medium term goals.

The higher the equity content the more extreme the roller coaster ride will be. I suspect many investors have been lulled in a false sense of security given the stock markets performance over recent years. There's a reason behind everything. Which often is only identified after the event and considerable research analysis has taken place. As investors we never stop learning.  Just when you think you've seen it all........

JohnWinder

I'm wondering if it's worth selling a chunk of VLS60 and/or any other 60:40 fund. 

Then to put 60% of the sale value into an index fund and the remaining 40% into a one year fixed term account @ 2%-2.5%

So we haven't arrived at a point where a 10 years plus investor would be better in cash than a 60/40 VLS?

Come on, folks. Please tell us how anyone could provide an answer unless it were a guess or predictions that could well be wrong?  How do such questions help a discussion?

Iain_For

Thrugelmir said:

Iain_For said:

The higher the equity content the more extreme the roller coaster ride will be. I suspect many investors have been lulled in a false sense of security given the stock markets performance over recent years. There's a reason behind everything. Which often is only identified after the event and considerable research analysis has taken place. As investors we never stop learning.  Just when you think you've seen it all........

Personally, still broadly 60/40 but with a more appropriate duration in the bond part. 

eskbanker

JohnWinder said:

I'm wondering if it's worth selling a chunk of VLS60 and/or any other 60:40 fund. 

Then to put 60% of the sale value into an index fund and the remaining 40% into a one year fixed term account @ 2%-2.5%

So we haven't arrived at a point where a 10 years plus investor would be better in cash than a 60/40 VLS?

Come on, folks. Please tell us how anyone could provide an answer unless it were a guess or predictions that could well be wrong?  How do such questions help a discussion?

Some threads are rightly dominated by facts, but there are plenty where discussion is inevitably more speculative, and in the latter it's perfectly valid for posters to express opinions about future directions, which can still add value to a discussion if accompanied by some sort of rationale, so asking for views about replacing bonds with cash seems legit to me....