Equity/bond ratio by age

safe_hands2

I found this video helpful in working out what felt right for me: https://youtu.be/ylxJePSnYR8

monaymadlol

He's a great guy. He looks a bit like Jim Bowen there.

GeoffTF

The video has got me thinking. He would say that I should be 100% equities, and perhaps even take on some leverage. My cash/bond allocation is much less than my age (which was the original rule of thumb), but it is still large in absolute terms. A lot more than I would need to buy a care annuity, and I could pay for care out of income anyway. Um... However, since my money will go to charity on my death, I can choose to optimise the minimum amount, or the likely amount. It comes down the psychology in the end. He was right about that.

leosayer

I'm planning to retire in 2 years time.

A year ago my ratio was 100/0.
Now it's 94/6.
In two year's time it should be 80/20 because all my new savings/contributions are going into cash and bond funds.

Is that the right ratio? Well it's right for me because those assets are there to supplement my DB pension which I plan to commence in 2 years time. Those ratios are unlikely to be suitable for someone else. 

Audaxer

GeoffTF said:

Essentially, I have followed another old adage: invest in the stock market only money that you can afford to lose.

I've heard that, but I think it should apply more to gambling than investing, as most people have an investment portfolio for their retirement that they cannot afford to lose. I would say it's better to invest up to your risk profile. So for those people that can cope with a volatile retirement portfolio that could potentially drop in value by 50% at times, then a 100% equity portfolio could be the right choice.

GeoffTF

Audaxer said:

GeoffTF said:

Essentially, I have followed another old adage: invest in the stock market only money that you can afford to lose.

I've heard that, but I think it should apply more to gambling than investing, as most people have an investment portfolio for their retirement that they cannot afford to lose. I would say it's better to invest up to your risk profile. So for those people that can cope with a volatile retirement portfolio that could potentially drop in value by 50% at times, then a 100% equity portfolio could be the right choice.

When I was a young man, the London market fell by 75%. Later on, the Japanese market fell by 90%, and still has not fully recovered. (Lets not even talk about the prewar Japanese stock market.) The global equity market probably will not be completely wiped out in my lifetime, but my supposedly safe investments would suffer in a severe global downturn. Equities toast, bonds untouched gives as good an indication as any of your downside risk. Fortunately, we have a state pension. Many people have a house too. You can live on very little when you are retired.

bostonerimus

GeoffTF said:

Audaxer said:

GeoffTF said:

Essentially, I have followed another old adage: invest in the stock market only money that you can afford to lose.

I've heard that, but I think it should apply more to gambling than investing, as most people have an investment portfolio for their retirement that they cannot afford to lose. I would say it's better to invest up to your risk profile. So for those people that can cope with a volatile retirement portfolio that could potentially drop in value by 50% at times, then a 100% equity portfolio could be the right choice.

When I was a young man, the London market fell by 75%. Later on, the Japanese market fell by 90%, and still has not fully recovered. (Lets not even talk about the prewar Japanese stock market.) The global equity market probably will not be completely wiped out in my lifetime, but my supposedly safe investments would suffer in a severe global downturn. Equities toast, bonds untouched gives as good an indication as any of your downside risk. Fortunately, we have a state pension. Many people have a house too. You can live on very little when you are retired.

If you borrowed to invest in those markets before the fall you would be well cooked. It's bad to lose your own money, but catastrophic to lose someone else's money - so I advise you against using leverage. With a DB pension, SP and a paid off house I can see 100% equity in retirement as viable, in fact I'm close to that myself, but I still keep a couple of years of cash spending in the bank for emergencies and as a financial comfort blanket.