Moving away from US Equities

itwasntme001

Alexland said:

I've dropped to around 50% equities because I wanted to lock in the circa 2% above inflation yield that long duration index linked gilts (ILGs) now provide.

I never had access to a DB pension so taking gains from equities and moving into ILGs gives me the hybrid multi asset portfolio that I always wanted but couldn't have when equities were almost the only thing worth investing in and bonds were overpriced during the zero interest rate period.

I now have enough in ILGs to cover all my current (non-mortgage) spending from age 55 onwards.

Within my remaining equities I am still using developed world trackers despite their high US/Mag7 exposure. I've toyed with the idea of messing around with the geographic weightings or using a high yield or value tilt but in the end decided to just leave the trackers to do their job. 

I've also done similar.  Had been 80% equities until recently to move to 65% equities.  The other 35% is in cash/nominal bonds and ILG at around 2% real, the latter is in my pension with the plan to convert to an annuity in 13 years time.

I am also retired (early) so common wisdom suggests not to take overly aggresive risks, hence the reduction in equities weighting.  But I do quesiton whether, given my age and potentially long retirement, I should actually be more aggressive.

Its easy to see decisions as well thought out (based on goals and need for risk) but subconciously driven by market timing to some extent.

Aminatidi

Is it that extreme?

I was looking at the Myfolio and L&G Multi-Index ranges recently and their (roughly) 60/40 funds have similarly low allocations to US equities.

masonic

Aminatidi said:

Is it that extreme?

I was looking at the Myfolio and L&G Multi-Index ranges recently and their (roughly) 60/40 funds have similarly low allocations to US equities.

Multi-Index 3, which is the cautious one, within its equities bucket has about 35% US equities and has used the underweight for UK equities (increased to nearly 20%) and the rest into small caps. Equities only make up 18.5% of this portfolio. VLS also famously has a similar level of home bias and has taken US equities down to 50% as a consequence. While MyFolio has taken the home bias to nearly 30%.

Home bias is quite a common feature of multi-asset funds. HSBC is one of the few that does not overweight the UK.

Aminatidi

I know  I think my point was it's not like it's some niche thing where Sussex_by_the_sea is going out of alignment with some other very mainstream funds by doing it.

fizio

Hmmm - I am still 100% equities in pension and ISA and about 90% US via S&P and dev world tracker
i do mull over reducing both equities and US but keep delaying it as they keep going up. I am not massively reliant on sipp/isa so can afford to be on the risky side of the spectrum 

eskbanker

fizio said:

Hmmm - I am still 100% equities in pension and ISA and about 90% US via S&P and dev world tracker
i do mull over reducing both equities and US but keep delaying it as they keep going up.

Are you waiting until they're going down?

talexuser

Joking, I'll ask what happening to time in the market compared to timing the market 

Not as extreme, I've lived through a few crashes and came out the other side, so while the dancing goes on I'll more or less stay at the party but maybe move quietly to a corner. Still have around 30% in world trackers at risk from US tech, but sold out of US index in the ISA (no capital gains problems) and putting all dividends into Personal Assets and Caledonia which is shifting the risk %s significantly, they are still equities I suppose but should dampen any fall. Maybe I should buy some gold like Personal Assets?

masonic

talexuser said:

Joking, I'll ask what happening to time in the market compared to timing the market 

Not as extreme, I've lived through a few crashes and came out the other side, so while the dancing goes on I'll more or less stay at the party but maybe move quietly to a corner. Still have around 30% in world trackers at risk from US tech, but sold out of US index in the ISA (no capital gains problems) and putting all dividends into Personal Assets and Caledonia which is shifting the risk %s significantly, they are still equities I suppose but should dampen any fall. Maybe I should buy some gold like Personal Assets?

PNL is very low in equities, and has selected a small number of companies balanced across sectors. Gold is itself quite risky, especially at current valuations. I personally favour index linked gilts for a much smoother ride and inflation protection. Could be sold early, likely for profit, in the event of a stockmarket crash. Though note that PNL has about a third of its portfolio in inflation linked bonds.

noclaf

I reduced US equities in my S&SISA last year to circa 40%, overweighted UK (FTSE 100) and EM and added bonds and a small proportion in a gold ETF. I do think this has helped to dampen the crashyness of the portfolio.

Even if the US markets specifically dipped/corrected/crashed would not assume the RoW markets will be immune to potential knock-on impact.

Both my SIPP and work pension are still skewed to US/US Tech. I figured with another 12 ISH years minimum before can access my DC pension and SIPP have a bit more time to ride out the peaks and troughs but no guarantees of course. My work pension is still heavily US-focussed however with regular monthly contributions I can potentially take advantage of dips and think it makes sense for now as focus is on growth. 

talexuser

Thanks, I agree Gold at an all time high might be a bit risky on the other side of the coin (oops, not intentional), and it seems to have been pretty high since 2020. Do you mean UK gilts or other bonds? never bought any.