Multi Asset 60/40

Linton

JohnWinder said:

Not just the UK 60/40's struggling in the USA the typical fund is having its worst YTD in 100 years. Note annual performance is around 80/20 up so realistically next year should be better ?

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That chart show us the annual performances of such a fund and compares it with this year’s YTD. It compares apples with part of an apple. Waiting until December 31 would have had validity, but a recovery might have occurred by then and spoiled the story. Or it could have compared this year’s YTD with every other years’ ‘year to mid-October’, and that would have been similarly fatuous.

Exactly.  Also relevent is that prices reached their maximum in December 2021.  So YTD data is completely dominated by the recent falls.  If the fall had started in July there probably would have been no "worst YTD for 100 years" headlines.

JohnWinder

Yes, that was my thought about holding period of ten years, but if we think through the issues I’m not sure how well it holds water.

15 years ago, someone holding that fund thinks ‘I’ve got time to smooth out volatility’. But they couldn’t wait until year 13 or 14 or they might experience exactly what that fund has experienced in the last year or so (up14% then down 25%, or two consecutive years of down 12% as that graph showed). So at some stage with a risky (volatile-prone) portfolio you have to start backing out and moving to less volatile assets. Since stocks can go nowhere for 10 years as we’ve seen, it’s a bit risky to be in a stock heavy portfolio with 9 years to go. If that’s the case for a person’s individual level of comfort, then such a fund with 10 years investing time remaining might not be worth the effort if one has to start selling and buying something new each year to match your time horizon.

Doesn’t it come back to ‘duration’ again? We know bonds’ duration, and for some of those 60/40 funds the duration of the bonds is a decade or so. One’s investment’s duration shouldn’t be too much longer than your spending duration. Then there’s stock’s duration! No one knows how to measure it, but it’s in decades not single figure years.

ian16527

Rich1976 said:

Earlier this year we shifted our pensions into a 60/40 portfolio. HSBC Global Strategy Balanced and VLS60 respectively. Our work pensions are in the default funds and I think the equities element is broadly similar. 

We have 15 to 20 years to go before we are looking to retire and whether we are doing the right thing is anyones guess, but we completed an online attitude to risk calculator and it said we are medium risk, which is pretty much correct for us as no longer have the stomach for falls of over 25% as an example.

I have these 2 funds as well, although the HSBC has performed better than VLS60.

safe_hands2

Are there any multi asset funds where average bond durations are shorter? My understanding is part of reason VLS funds have done worse is average longer duration of their bonds.

Kendall80

To the 2 posters that responded to my ISAs 7% in 7 post - Yes thats 7% total in 7 years from my 60:40 portfolio. There are other factors contributing to this underperformance such as holding too much cash in the post Covid bounce and drip-feeding over the 7 years.

My SIPP (60:40 core) is doing much better but that was enhanced with Baillie Gifford Global Discovery and Stewart Asia Pacific Leaders in the early years. Now is boosted with an inverse gas price ETF that itself is 30% up in roughly 2 months.