ETF SIPP Split

Duvaljones

Hi everyone,

So I have funds to invest in a new SIPP and I was edging towards Vanguard's All World ETF (VWRL) mostly through laziness and convenience. However, now that I'm over 50 I was thinking of setting aside a percentage (say 20-25% of the available funds) to invest in Bond/Gilt ETFs to add a bit of stability. I'm not looking at touching my funds for the forseeable future though (i.e. at least until 60).

However, having read multiple articles on the subject, and being a novice investor, I'm wondering if this is the right path and whether I should just stick the All World ETF and let it run.

I understand advice can't be given but I'd appreciate some more experienced heads giving their thoughts on this?

Many thanks

nodddy

Hi DJ, I’m in the same boat.
53 hoping to retire at 60. Got a decent DB pension then but need to plug the gap up until SP at 67.
To quote James Shack I keep getting in my own way. 

One minute I’m all in on HSBC All World then I change to a MMF thinking 4 1/2 % isn’t bad, then I think I’ll do the Permanent Portfolio or even put a lump into a Gilt to pay out just before I retire.
Cant stop dithering!
I feel my risk tolerance is low so stopping me following a plan and sticking with it.

Albermarle

From an investment return point of view, a global indextracker should give you the best result, especially if held for a minimum 10 years . This is based on history of course, and anything can happen but the evidence is pretty strong.
The downside is the volatility that such a fund can have, and many investors do not have the stomach for it, especially if retirement is on the horizon, but also for younger people too.
You have to try and imagine what you would do if markets crashed, and your fund lost maybe 20% in a week and/or 40% in a month. The media would be blaring headlines about financial Armageddon etc.
If you think there was any possibility in that scenario that you would panic and sell ( at the worst possible time probably) then 100% equity is not for you.

GeoffTF

10 years will not guarantee a positive result from 100% equities. Having a percentage in bonds, e.g. VAGP, is safer. VWRL will most likely do better, but the downside, if it happens, is worse. It is up to you.

Linton

Duvaljones said:

Hi everyone,

So I have funds to invest in a new SIPP and I was edging towards Vanguard's All World ETF (VWRL) mostly through laziness and convenience. However, now that I'm over 50 I was thinking of setting aside a percentage (say 20-25% of the available funds) to invest in Bond/Gilt ETFs to add a bit of stability. I'm not looking at touching my funds for the forseeable future though (i.e. at least until 60).

However, having read multiple articles on the subject, and being a novice investor, I'm wondering if this is the right path and whether I should just stick the All World ETF and let it run.

I understand advice can't be given but I'd appreciate some more experienced heads giving their thoughts on this?

Many thanks

I you going to take all your money at 60, perhaps to buy an annuity, it could make sense to start derisking now, increasing the % of non-equity each year until 60.

If not, rather than choosing some arbitrary % non-equity I suggest you base your allocations on your planned objectives for the money.  For example it may be drawn down gradually over your retirement (if not longer if you are intending to use it as an inheritance)  and so some may not be accessed for say 30 years. In that case I would separate out say perhaps 10 years projected usage and put that into increasingly safer investments.  The rest can be kept at 100% equity.

The objective is to ensure you do have the money available for when you need it but do not put too much into safer investments than is necessary to achieve this.

JohnWinder

It’s easy enough to know the issues but it’s very hard for an individual to answer your question for their self, and you shouldn’t expect to get it perfectly right.
#1 As noted, you need to ‘know thyself’. How much loss are you comfortable with, lest you make an irrational decision at great cost?
#2 As noted, some history of how investments perform will help you. https://www.portfoliovisualizer.com/backtest-asset-class-allocation. Here you can choose to view asset class results for different periods; very informative. Elsewhere, you can read folks’ analyses of such data. A Nobel prize winner estimated 8% is the best estimate of the chance you’d have got better returns holding safe bonds only rather than any US equities for a period of 20 years, during the last 50 years. Get familiar with the data.
#3 Countless pension plans, personal investors and fund managers struggle with your question. They’ve made their choices, so have a look at how your choice compares with theirs for a reality check. https://www.bogleheads.org/forum/viewtopic.php?t=406887