What long-ish term (10yrs) investments do you make, where, and why?

JohnWinder

 opinions on things like investing that money right now. Eg investing in the UK vs RoW.....

Here are two sources of information about what proportions of home country equities compared to RoW one might hold, starting from the premise that a global distribution is a good start which might or might not be improved on.

https://www.vanguard.ca/documents/home-bias-allocation.pdf

The other analysis has so much data that I can’t do it justice with a summary, but it tests home bias no more than 43% UK 55% global for UK investors and concludes it hasn’t been a bad mix over a recent 50 years. Readers might conclude less would suit them better from now on based on this analysis. https://www.bogleheads.org/blog/2020/03/02/50-years-of-investing-in-the-world-part-3/ 

Let us know if you find any good sources of information.

AllNightDiner

Very helpful, thank you. I could not access the first link you mention but found this along the way which may be useful:
https://corporate.vanguard.com/content/dam/corp/research/pdf/Global-equity-investing-The-benefits-of-diversification-and-sizing-your-allocation-US-ISGGEB_042021_Online.pdf

Also, this article references the study which you may have been referring to, a Vanguard Canada June 2023 analysis https://www.investmentexecutive.com/newspaper_/focus-on-products/how-much-home-bias-is-too-much/

Our Sunday tasks are to look at iur portfolio and determine where we want eventually to take it. 

JohnWinder

Sorry for the dead link. https://corporate.vanguard.com/content/dam/corp/research/pdf/Global-equity-investing-The-benefits-of-diversification-and-sizing-your-allocation-US-ISGGEB_042021_Online.pdf.  This should get it, although it’s the 2021 version; I was pointing you to the 2019 version. Or you can search for:

Global equity investing: The benefits of diversification and sizing your allocation Vanguard 2019

Linton

Pat38493 said:

Linton said:

With investing 10 years is short/medium term, not long term.  Are you going to spend all the money in 10 years, say buying an annuity,  or could your usage spread over possibly several decades and so you would have an average outlook of much more than 10 years?  I assume the latter.

In one way I take your piont, but, when choosing how to invest the money, I would generally take the view that I don't need for at least 10 years or more, goes into a "long term" bucket - yes some of it may only be needed 30 years later, but anything 10 years plus I would put in a long term approach (which in my view at the momen would be 100% equities).

I agree though that OP could take the approach to look at for example:
- How much will I need in first 2 years?
- How much in following 3 years?
- How much in years 5-10
- Years 10+

And then take an investment approach accordingly.  Of course this is a bit more work as you say as you have to recalculate it and make adjustments each year.

I assumed that what the OP meant by "10 years"  is that there was tno intention to withdraw any money until retirement in 10 years time.  If earlier withdrawal is required then yes, that would need to be be covered by configuring the portfolio to meet the requirements.

As to whether 10 years is sufficient to be classified as "long term" for this purpose I would be caurtious.  In any case, 1 year from now it would be 9 years.  Better I think not to worry aboutwhether its 0 or 1 year  longterm. Any benefit from 1 year of higher risk is likely to be minimal, and quite possibly non-existant.

So in my view a simple 60/40 allocation is fine for the purpose.  What the asset allocation should be in 10 years time rather depends on the drawdown strategy, whch we know nothing abut.

Linton

AllNightDiner said:

..........

Our question is what to do with the money now? At present it is split between fixed interest, etfs, and individual stocks, the latter of which we don’t really have time or expertise to keep up with and would like to convert to something simpler.

We would love to hear opinions on things like investing that money right now. Eg investing in the UK vs RoW etc. Fixed income? High-yielding equities? Or keep it all in a low-fee index fund?

And after say 10 years, what would you do with the money?

As per the previous comment I am still unclear whether you intend to start withdrawing now or will start in 10 years time.

If it is 10 years time then my previous proposal holds - a simple  60/40 global equity/bond allocation.  Then move to your retirement allocation in say 6 years time. If starting withdrawal now I suggest that you come up with a an overall financial plan for retirement and then split your investment accordingly between needs for 0-5 years (both regular withdrawals and larger one-offs) , 5-10 years, and > 10-12 years.  The first tranch should be in cash or near to cash, the second in pretty cautious investments and the final could be 100% equity.  If circumstances change in the future you can adjust your split accordingly.

There are other ways of approaching the problem. But at this stage I think this should be sufficient especially since I understand from your comments that withdrawals are likely to be ad hoc and you are not looking for a steady income.

In this way income is near enough guaranteed for the next 10-12 years, there should be plenty of 100% equity to provide for long term inflation, and you can face a major equity crash with equanimity.  If  the world overall has not recovered in 10-12 years the income from these investments may not be your greatest worry.

As to what you should do with your current portfolio - I suggest you sell the lot and  get it set up as it should be immediately.  In particular holding a limited number of individual shares is high risk.  It is in my view unlikely to provide the corresponding returns unless you are happy to spend your time on research and analysis of individual company financial data.

SVaz

Something else worth considering is Annuities for part of the pot once you reach 65-70.
If rates stay on the high side then fixed term annuities with a guarantee will be something I will be looking at in 8 years or so.
I’ve just looked at a 5 year one and for £100k with 100% guarantee at 67 is £6k income.
If I had a £500k pot for ‘extras’  then a £200k annuity giving me £12k plus my money back after 5 years would definitely appeal.  

You also need to consider your later years,  would you like to ring fence a portion of the pot for potential care fees or inheritance?  

What about if one of you dies and the other loses 1 State pension and half a DB pension?
If I go,  my Wife will lose approx £15k a year at SP age.  I’d ‘only’ lose her SP. 

There are so many considerations. 

AllNightDiner

Thanks @Linton - much appreciated. We do not intend to withdraw the money for at least ten years and then, as you say, we would use it only to supplement our basic guaranteed income. 

It is interesting that you suggest the 60/40 allocation even given our relatively high risk tolerance - will chew on that.

Your point is well-taken that 10 years is not long-term - and also your point that if markets do not recover within a 10-12 year period there may be more pressing things to worry about.

Basically, we just want to put the investments we have accumulated into something which has the potential to grow more than just having it sit in the bank. And we are nosey - I mean curious - about what others might have done in a similar situation. There is another good thread on that topic which is running at the moment.

I agree that we should literally cut our losses with individual stocks and get started with the new strategy. Now we just have to determine which funds to put them into,

AllNightDiner

Thanks @SVaz for your perspective. Annuities are indeed attractive at the moment, but given that we have other defined benefit income streams we would look at this as one to take greater risk on (although as you say that would be reassessed if one of us dies unexpectedly).

Ivkoto

I would suggest looking at this find ⬇️

https://www.trustnet.com/factsheets/O/gfzl/blackrock-consensus-85///

Pat38493

AllNightDiner said:

Thanks @Linton - much appreciated. We do not intend to withdraw the money for at least ten years and then, as you say, we would use it only to supplement our basic guaranteed income. 

It is interesting that you suggest the 60/40 allocation even given our relatively high risk tolerance - will chew on that.

Your point is well-taken that 10 years is not long-term - and also your point that if markets do not recover within a 10-12 year period there may be more pressing things to worry about.

Basically, we just want to put the investments we have accumulated into something which has the potential to grow more than just having it sit in the bank. And we are nosey - I mean curious - about what others might have done in a similar situation. There is another good thread on that topic which is running at the moment.

I agree that we should literally cut our losses with individual stocks and get started with the new strategy. Now we just have to determine which funds to put them into,

That's fairly cautious to do 60/40 - I would probably put it 100% equities for the first year, then maybe 80/20 for next few years, and move down to 70/30 or 60/40 for the last years - in the last 2 years you might want to put some in a cash bucket as well.

This is really based on your personal risk tolerance.  I say this also because you mentioned that you have DB pensions to cover the basics (although you haven't said how much they will be).