Funds for Equity portion

Pat38493

Any comments on the below equity split which I found as a recommendation?  It seems to give pretty good performance on historical simulations (better than all of the individual funds that I looked at so far).

I guess the downside to this is that I have to pay 4 sets of transaction fees to buy it and then 4 x every time I want to re-balance in future?

AlanP_2

A recommendation from who to achieve what?

If they weren't aiming for your target then it's a useless recommendation.

Pat38493

AlanP_2 said:

A recommendation from who to achieve what?

If they weren't aiming for your target then it's a useless recommendation.

It was the current recommended 100% equity fund used as an example in the Timeline planning software.

I guess my target is that my programmed spending plan should
a) Have a zero or very low historical chance of running out of money before I die
b) Have a good chance of upsides in benign market scenarios.

What I noted about the above fund mix is that it achieved both those results (at least according to the Timeline software historically).  Other 100% equity options I looked at (e.g. putting 100% all in Vanguard Glogal all world) didn't achieve the same results in both ways (although I guess some will argue that the differences are not significant in the grand long timescales concerned).

My plan would be to stay invested in that mix for the equity part of my portfolio indefinitely - or at least for quite a few years.  I am putting about 25% of my portfolio into Money Market as I intend to access it within 2-3 years.

However I would probably replace "Dimensional Global Targeted value" with the Vanguard small/med cap fund, partly because I am not that keen on active funds with high charges and partly because the former is not available on Interactive Investor unless you do an expensive telephone trade.

I also found this interesting article stating that aiming for a 99.9% probability of success on historic or monte carlo simulations is overkill and will most likely mean you end up saving more than you need and working longer than you need.  I have mainly been aiming for close to 100% whereas this is saying:

"The “just right” success probability for your retirement plan should be in the 75-90% zone. Aiming for 85% is ideal.".  Granted this is just one article on Linked in so I 'm sure opposite opinions exist.

https://www.linkedin.com/pulse/goldilocks-just-right-probability-retirement-planning-cordaro

older_and_no_wiser

That Dimensional fund looks like it's mainly small caps (according to Morningstar). In which case my opinion is that 31% of your portfolio is a lot in small caps as they are pretty volatile. You may like that over the long term. It's all subjective.

Linton

As long as you are broadly diversified I dont think it matters much in the long term grand scheme of things with 100% equity what funds you are using and the precise values of your allocations.  The problem with retirement financing is more about managing the short and medium term.
 
If you use SWR with 99% pass rate I think you will find that in the majority of scenarios you end up with more money than you started with. On the other hand do you want to have the worry of a 75% success rate,  assuming that you believe those % figures have any great usefulness?  What you do about that dilemma is where things get more interesting.

leosayer

Making an allocation decision towards small-caps, emerging markets and property companies seems counter-intuitive when Vanguard FTSE Global All-Cap will contain those 3 factors  with a market cap-based weight. 

It's as close to 'hold the world' as you can get with an equity fund.

Linton

leosayer said:

Making an allocation decision towards small-caps, emerging markets and property companies seems counter-intuitive when Vanguard FTSE Global All-Cap will contain those 3 factors  with a market cap-based weight. 

It's as close to 'hold the world' as you can get with an equity fund.

Yes but:
1)  you may wish to have different %s
2) As far as I know no other company offers an all cap, all world fund.  The index Vanguard use is I believe one they commissioned from FTSE and so not available to other providers.  If dont want to use Vanguard funds or can't (eg in an employer's pension linked to another fund provider) you would need to construct your own equivalent.

PS 3) I dont think the All Cap fund is available as an ETF.

DT2001

Pat38493 said:

AlanP_2 said:

A recommendation from who to achieve what?

If they weren't aiming for your target then it's a useless recommendation.

I also found this interesting article stating that aiming for a 99.9% probability of success on historic or monte carlo simulations is overkill and will most likely mean you end up saving more than you need and working longer than you need.  I have mainly been aiming for close to 100% whereas this is saying:

"The “just right” success probability for your retirement plan should be in the 75-90% zone. Aiming for 85% is ideal.".  Granted this is just one article on Linked in so I 'm sure opposite opinions exist.

https://www.linkedin.com/pulse/goldilocks-just-right-probability-retirement-planning-cordaro

Very interesting article. The key is your willingness/ability to be flexible with your expenditure.
If you have a plan B and C then you need to accumulate less.

It is fear of the unknown that understandably makes some more nervous than others about retiring.

m_c_s

There is an All Cap ETF that I use. It's V3AM which actually is a Vanguard ETF. It is an ESG style fund which uses the FTSE Global Choice Index so some companies will be excluded.

Pat38493

DT2001 said:

Pat38493 said:

AlanP_2 said:

A recommendation from who to achieve what?

If they weren't aiming for your target then it's a useless recommendation.

I also found this interesting article stating that aiming for a 99.9% probability of success on historic or monte carlo simulations is overkill and will most likely mean you end up saving more than you need and working longer than you need.  I have mainly been aiming for close to 100% whereas this is saying:

"The “just right” success probability for your retirement plan should be in the 75-90% zone. Aiming for 85% is ideal.".  Granted this is just one article on Linked in so I 'm sure opposite opinions exist.

https://www.linkedin.com/pulse/goldilocks-just-right-probability-retirement-planning-cordaro

Very interesting article. The key is your willingness/ability to be flexible with your expenditure.
If you have a plan B and C then you need to accumulate less.

It is fear of the unknown that understandably makes some more nervous than others about retiring.

Yes - and also based on some other research I've read, you also have to be aware of the level of flexibility that might be needed.  Many people imagine this to be shaving of a few % off your spending for a year or two.  However in worst case scenarios you could be looking at dropping your draw by 10 or 20% for more than 5 years at a time.  This might be ok if all your mandatory costs are covered from guaranteed sources, but you need to be aware not just of "be flexible" but the extent of time that you may have to cut spending for at the worst case.

Pat38493

Linton said:

leosayer said:

Making an allocation decision towards small-caps, emerging markets and property companies seems counter-intuitive when Vanguard FTSE Global All-Cap will contain those 3 factors  with a market cap-based weight. 

It's as close to 'hold the world' as you can get with an equity fund.

Yes but:
1)  you may wish to have different %s
2) As far as I know no other company offers an all cap, all world fund.  The index Vanguard use is I believe one they commissioned from FTSE and so not available to other providers.  If dont want to use Vanguard funds or can't (eg in an employer's pension linked to another fund provider) you would need to construct your own equivalent.

PS 3) I dont think the All Cap fund is available as an ETF.

Looking at the modelling a bit more, it looks like adding the additional 7% real estate investments seems to be a bit of a drag, if I just increase the share of global trackers it gets a better result actually.