Critique our updated 2023 retirement investment portfolio

eskbanker

Richard1212 said:

I have already posted earlier on this thread and I stand by what I said in that post.

IMHO this thread has become a much wider and over-complicated mish mash of self-gratifying posts when it is fairly obvious to anyone with any experience at all that the O/P is doing a good job already; and any suggestions for improvement to his allocation can surely only revolve around small nuances rather than any major financial treatises about wide and complex issues.

Yes, now that you've dispensed your pearls of wisdom, everyone else is simply wasting their time 🙄

masonic

Richard1212 said:

IMHO this thread has become a much wider and over-complicated mish mash of self-gratifying posts when it is fairly obvious to anyone with any experience at all that the O/P is doing a good job already; and any suggestions for improvement to his allocation can surely only revolve around small nuances rather than any major financial treatises about wide and complex issues.

Well I do hope none of us have annoyed the OP by branching out into discussions not directly linked with the composition of his portfolio. I think the shift in focus can be taken to mean that there was little to criticise about the portfolio. I can only speak for myself, but I'm here for the meandering discussions. There would be so much less to learn if we were forced to rigidly stick to the matter at hand.

noclaf

masonic said:

It's a shame that there isn't (as far as I'm aware) any ETF tracking EAFE or a global index ex-USA, as there is in the US itself. Regional trackers could be used to balance the geographic allocations in the way that you want. Depending on your reasons for reducing the US, the excess could be allocated to other assets. Tactical asset allocation often involves allocating to defensive assets or undervalued equity markets. If diversification is the driver, then markets with a complementary style bias (growth vs value), or different sector weightings could help you achieve a better blend of underlying holdings. Some UK bias could therefore complement the growth and tech focused S&P500 exposure that remains.

Thanks Masonic, I have at least 15 years to retirement. My reason for considering reducing US is what if it doesn't deliver much growth over the next 10 years and instead a lower US allocation and increased exposure to other sectors/geographies will help drive my accumulation phase. I'm not sure if anyone knows the answer but as most passive global equities trackers are 60-70% US would need separate regional trackers to tweak the allocations/have more control over the portfolio.

Dh6

noclaf said:

what if it doesn't deliver much growth over the next 10 years 

What if it does?

Ultimately nobody knows. Like most passive investors I accept I don’t know either way which is why I let the market do it for me in my global tracker.

Either you can think you can, or attempt to beat the market ( which I accept is possible ) or remove all of the stress involved and construct a passive portfolio of equities, cash, bonds suited to your risk tolerance and live your life.

Best of luck.

DH

GazzaBloom

masonic said:

Richard1212 said:

IMHO this thread has become a much wider and over-complicated mish mash of self-gratifying posts when it is fairly obvious to anyone with any experience at all that the O/P is doing a good job already; and any suggestions for improvement to his allocation can surely only revolve around small nuances rather than any major financial treatises about wide and complex issues.

Well I do hope none of us have annoyed the OP by branching out into discussions not directly linked with the composition of his portfolio. I think the shift in focus can be taken to mean that there was little to criticise about the portfolio. I can only speak for myself, but I'm here for the meandering discussions. There would be so much less to learn if we were forced to rigidly stick to the matter at hand.

@Richard1212 I do take the replies as they are intended and take a level of comfort that no-one has blown my portfolio out of the water!

@masonic The nuanced meanderings are fine and I sense a few points, a nervousness of the future of the US market's performance, concerns over the currency exposure against the USD and a suggested dalliance with bonds.

With regards the US, no-one knows what the future holds, but, I have my own beliefs after having spent a fair bit of time in the US since 2006. Top down, I believe the US will continue to dominate for decades or maybe another century. It's a huge swathe of land, unlikely to be invaded in a land war by any of it's land locked neighbours, has enormous natural resources, a huge pool of talent, the ability to attract more talent, and a huge body of millions of workers, all coupled with a work ethic, economy and regulation that promotes capitalism. The progress of the US is phenomenal, from birth of an independent country to putting a man on the moon in 193 years. There is much more growth and development of the US to come.

I don't believe a Japanification stagnation will occur to the US, as the Japan situation is as much cultural as it is fiscal policy. I am happy to bet on America and believe that it's a solid bet. However, the US does suffer from the same developed country trends of declining birth rates and aging population. These are problems that will hinder economic growth over the long term for all developed countries. 

But, it's my money and I can't succumb to all the “what ifs”, if we try to mitigate all risk we will never invest or be so cautious that decades of portfolio growth potential will be missed.

With regards GBP vs USD, I checked the lost decade, 2000-2010 and did some fag packet calcs on the S&P500 (ignoring dividends for now) and ran the numbers in USD and GBP allowing for the annual fx gains/losses and the GBP portfolio did marginally better, despite some significant gains of GBP against the USD at times during that period, I still maintain that you decide to hedge or remain unhedged and stick with it for the long haul. I am unhedged and will remain so.

As for bonds, I will continue to learn but, they are not passing my sniff test at present so, for now, it's stock index funds and cash for me, certainly while at this level of healthy accumulation.

JohnWinder

….much more growth and development of the US to come.

I don't believe a Japanification stagnation will occur to the US, as the Japan situation is as much cultural as it is fiscal policy. I am happy to bet on America and believe that it's a solid bet.’

I think the ‘betting on America’ wording might confuse some people.

Assuming your US stocks reflect global market capitalisation at ~70%, which I think we’ve established close enough,  I see it as you are ‘investing’ in US stocks (and thus taking all the usual stock investing risks) but not betting. 

Were there only 2 stocks on the planet, one nine times as big as the other, you would invest your money in them 90/10 as the most ‘balanced’ investment. To put 50/50 in each stock would be a bet on the smaller one doing better than the bigger; similarly to put 99/1 in the two stocks would be to bet the bigger would do better. To go 90/10 is not betting, it’s investing.

I don’t think you have to justify market cap weighted investing by imagining sunny uplands for a country which looks a lot worse to plenty of observers. You’re just investing in it, not betting on it. That might be splitting hairs, but if one believes one needs to invest there is no need to bet, and there is a difference.

noclaf

Dh6 said:

noclaf said:

what if it doesn't deliver much growth over the next 10 years 

What if it does?

Ultimately nobody knows. Like most passive investors I accept I don’t know either way which is why I let the market do it for me in my global tracker.

Either you can think you can, or attempt to beat the market ( which I accept is possible ) or remove all of the stress involved and construct a passive portfolio of equities, cash, bonds suited to your risk tolerance and live your life.

Best of luck.

DH

As of now my SIPP uses a fairly simple and reasonably cost-effective approach based on two ETF's (Global Equities Dev world / EM) so for now not much will change while I mull it over....as to whether I can beat the market....highly doubtful but it's occasionally tempting to try  

aroominyork

Good discussion. Three points to add:

1.       Given the FTSE100 contains a fair number of dinosaurs (banks, oil etc.) have you looked at the FTSE250 for your UK allocation?

2.       Bonds are a very broad asset class – everything from gilts up to high yields that behave similar to equities. For example, chart the FTSE All Share against Royal London Sterling Extra Yield Bond and they have behaved very similarly. Buying bonds does not mean buying safety – it can mean pretty much anything you want it to mean.

3.       Dunstonh’s recent mentions of hedging USD got me thinking. Although I cap my US allocation around 40% (I broadly split equities as US 40%, UK/Europe 30%, EM/Japan/Developed AP 30%) I wanted a little diversification from US large caps so a while ago I bought a North America smaller companies fund. I have now decided it isn’t especially useful diversification: US smaller companies, historically, have not outperformed or radically deviated from large caps the way the UK’s have, so last week I sold it and bought a hedged S&P index fund (Fidelity’s). It only account for about 15% of my US allocation but I’m content to hold it.

Eco_Miser

GazzaBloom said:

 I believe the US will continue to dominate for decades or maybe another century. It's a huge swathe of land, unlikely to be invaded in a land war by any of it's land locked neighbours,

Geographical nit-pick: that's a dead cert, since it has no land locked neighbours.

Putin might want to repudiate the sale of Alaska though.

GazzaBloom

JohnWinder said:

….much more growth and development of the US to come.

I don't believe a Japanification stagnation will occur to the US, as the Japan situation is as much cultural as it is fiscal policy. I am happy to bet on America and believe that it's a solid bet.’

I think the ‘betting on America’ wording might confuse some people.

Assuming your US stocks reflect global market capitalisation at ~70%, which I think we’ve established close enough,  I see it as you are ‘investing’ in US stocks (and thus taking all the usual stock investing risks) but not betting. 

Were there only 2 stocks on the planet, one nine times as big as the other, you would invest your money in them 90/10 as the most ‘balanced’ investment. To put 50/50 in each stock would be a bet on the smaller one doing better than the bigger; similarly to put 99/1 in the two stocks would be to bet the bigger would do better. To go 90/10 is not betting, it’s investing.

I don’t think you have to justify market cap weighted investing by imagining sunny uplands for a country which looks a lot worse to plenty of observers. You’re just investing in it, not betting on it. That might be splitting hairs, but if one believes one needs to invest there is no need to bet, and there is a difference.

That's well put, thanks