Fund Selection

Bostonerimus1

chiang_mai said:

Somebody earlier mentioned drawdown and being unsure how to use this....

I have ensured that I cover my needs from guaranteed sources, so that's SP, DB pension and a small annuity. If I didn't have the DB pension I would probably have a bond ladder.  With my income guaranteed I can invest my money in 90% equities. This portfolio produces dividends and interest every year that are multiples of my annual spending.

chiang_mai

Bostonerimus1 said:

chiang_mai said:

Somebody earlier mentioned drawdown and being unsure how to use this....

I have ensured that I cover my needs from guaranteed sources, so that's SP, DB pension and a small annuity. If I didn't have the DB pension I would probably have a bond ladder.  With my income guaranteed I can invest my money in 90% equities. This portfolio produces dividends and interest every year that are multiples of my annual spending.

One of the other differences between us is that my investment portfolio is completly separate and apart from my retirement income. My retirement income is also funded by guaranteed sources, including UK SP, US SSc, a small private pension and variable returns on savings. My investment portfolio comprises other funds that were originally generated by a private pension pot and SERPS contracted out money. I once regarded this pot as non essential "fun" money that can be risked. As I've grown older, the importance of leaving as much as possible  to my wife has given it new meaning.   Drawdown however, remains an important metric for anyone to understand, particularly older investers, because it helps define the risk period following a downturn when funds may not be available, regardless of their importance or  the investers reliance on them.  

chiang_mai

The folowng link takes you to the Morningstar investers newsletter that appears in my inbox every week, you may recieve the same thing. Reading it today, I was struck by a couple of points that could well do with being reinforced, especially for those members who are still in the early days of learning about investing.

The subject is the asset allocation of the global portfolio and also the US allocation within that mix. I think it's important to remember that Morningstar is a North American centric organisation and that whilst a 64% allocation to US equities may suit some Americans, it may not suit everyone.
 
The message that I got from reading the article and its links is to be adaptable to change and prepared to vary assets and geographies, as circumstances change.....(some of you will know far better than me whether I did or didn't)   

Anyway, an interesting and somewhat thought provoking article.


 https://www.morningstar.com/markets/what-you-can-learn-global-market-portfolio?utm_source=eloqua&utm_medium=email&utm_campaign=improvingfinances&utm_content=none_68766&utm_id=35761&elqTrackId=648b4e2fe28c4e5d8dbef1f7236e1572&elq=d1c167fcbdc54433aa81bdd76afecdc9&elqaid=68766&elqat=1&elqCampaignId=35761&elqak=8AF57951DAB6C724E55B228F77D951108DEA0938272FA8D79E5B40FD155C4AC8A60E  

Bostonerimus1

chiang_mai said:

Bostonerimus1 said:

chiang_mai said:

Somebody earlier mentioned drawdown and being unsure how to use this....

I have ensured that I cover my needs from guaranteed sources, so that's SP, DB pension and a small annuity. If I didn't have the DB pension I would probably have a bond ladder.  With my income guaranteed I can invest my money in 90% equities. This portfolio produces dividends and interest every year that are multiples of my annual spending.

One of the other differences between us is that my investment portfolio is completly separate and apart from my retirement income. My retirement income is also funded by guaranteed sources, including UK SP, US SSc, a small private pension and variable returns on savings. My investment portfolio comprises other funds that were originally generated by a private pension pot and SERPS contracted out money. I once regarded this pot as non essential "fun" money that can be risked. As I've grown older, the importance of leaving as much as possible  to my wife has given it new meaning.   Drawdown however, remains an important metric for anyone to understand, particularly older investers, because it helps define the risk period following a downturn when funds may not be available, regardless of their importance or  the investers reliance on them.  

You have an amazing ability to misread posts and come to erroneous conclusions. We are, in fact, in similar situations as my investment portfolio is also separate and not necessary to generate retirement income. But if I did ever need to take income from the portfolio it's dividends and interest each year would cover my spending requirements many times over.
For drawdown I think most people should start from a baseline budget and see how much is covered by things like SP and then decide an asset allocation that might include an annuity and a bond ladder and equity portfolio using a Total Return strategy and a variable withdrawals (like G-K) starting at maybe 4%. Drawdown is often significantly more complex than the accumulation phase, but the usual strategies account for downturns and recovery with bond and cash allocations.

chiang_mai

I personally like the DIY annuity, it leaves you free to decide withdrawl levels and also levels at which you want to remain invested, without committibng to a loss once you pass on and enter probate..

masonic

chiang_mai said:

I personally like the DIY annuity, it leaves you free to decide withdrawl levels and also levels at which you want to remain invested, without committibng to a loss once you pass on and enter probate..

The issue with a DIY annuity, such as a gilt ladder is that if you start with an equivalent amount of capital it will run out before a conventional annuity should you live longer than planned. The issue with a conventional annuity is that there will be nothing remaining if you don't live as long as planned. So you will prefer a different option if your priority is being able to leave a legacy if you can vs ensuring your income never runs out.

You can get the best of both worlds by including an element of both in your retirement strategy, remembering that the state pension can be used as a pseudo-annuity to cover part of that need.

Qyburn

chiang_mai said:

I bought in during the Trump Slump is what we all would ideally like to do, buy the dip or at the bottom. The second part of getting out when the party is nearly over is just as difficult but not impossible ..    

Another missing element is where the money came from to buy in at (or near) the low. Was it cash just sitting there not earning anything, or was it raised by selling investments that possibly had lost value.

chiang_mai

Qyburn said:

chiang_mai said:

I bought in during the Trump Slump is what we all would ideally like to do, buy the dip or at the bottom. The second part of getting out when the party is nearly over is just as difficult but not impossible ..    

Another missing element is where the money came from to buy in at (or near) the low. Was it cash just sitting there not earning anything, or was it raised by selling investments that possibly had lost value.

It was a combination of too much idle money just sitting there, plus a series of unconnected and unstructured funds that hadn't lost money but were wandering aimlessly and without pupose. I essentially threw my toys out of the pram and decided to start again with a blank sheet of paper, which was enornously satisfying and a good opportunity to clear my head. I had some legacy funds that, whilst they weren't unprofitable, I was holding them for reasons of nostalgia rather than any practical strategic purpose. I had other funds where the strategy had changed and had become disconnected for the pack. It was a bit of a train wreck I'm afraid to admit. BTW it's not unusual for me to be 25% in cash, it's what I am currently in my investment holdings. It's not very efficient I know but I haven't found any good safe alternatives that I'm happy with.

chiang_mai

Bostonerimus1 said:

chiang_mai said:

Bostonerimus1 said:

chiang_mai said:

Somebody earlier mentioned drawdown and being unsure how to use this....

I have ensured that I cover my needs from guaranteed sources, so that's SP, DB pension and a small annuity. If I didn't have the DB pension I would probably have a bond ladder.  With my income guaranteed I can invest my money in 90% equities. This portfolio produces dividends and interest every year that are multiples of my annual spending.

One of the other differences between us is that my investment portfolio is completly separate and apart from my retirement income. My retirement income is also funded by guaranteed sources, including UK SP, US SSc, a small private pension and variable returns on savings. My investment portfolio comprises other funds that were originally generated by a private pension pot and SERPS contracted out money. I once regarded this pot as non essential "fun" money that can be risked. As I've grown older, the importance of leaving as much as possible  to my wife has given it new meaning.   Drawdown however, remains an important metric for anyone to understand, particularly older investers, because it helps define the risk period following a downturn when funds may not be available, regardless of their importance or  the investers reliance on them.  

You have an amazing ability to misread posts and come to erroneous conclusions. We are, in fact, in similar situations as my investment portfolio is also separate and not necessary to generate retirement income. But if I did ever need to take income from the portfolio it's dividends and interest each year would cover my spending requirements many times over.
For drawdown I think most people should start from a baseline budget and see how much is covered by things like SP and then decide an asset allocation that might include an annuity and a bond ladder and equity portfolio using a Total Return strategy and a variable withdrawals (like G-K) starting at maybe 4%. Drawdown is often significantly more complex than the accumulation phase, but the usual strategies account for downturns and recovery with bond and cash allocations.

I read your post that you were investing at least some of your retirement income, after all, you did write, "With my income guaranteed I can invest my money in 90% equities". I interpreted that as your investment funds were sourced from retirement income. In my case, the investment pot was there long before the retirement income came on stream hence it is completly separate. Never mind, it's all clearer now.

chiang_mai

I struggle at times with deciding the right levels of geographic equities allocations (for me) thus reading the following link was helpful to understand that the range of alternatives (in the case of EM at least) can be very large. 

https://www.vaneck.com.au/blog/international-investing/four-ways-to-determine-your-international-equities-allocation/

Here's a second link from LSEG that discusses UK allocations, which may also be helpful to newer members.

https://www.lseg.com/en/insights/data-analytics/putting-uk-equities-in-perspective