US Markets Risk

aroominyork

We're rehashing ground that has been hashed many times before. The market reflects the views of all investors and, unless I think I know better than them, I will for the most part piggyback their views.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/82021046#Comment_82021046

Taking the majority view has merit and I have no doubt the majority view in the UK and US is that the numbers are just fine as they are. I however do not take the majority view on this one, nether it seems do many investors in the East, which was really my point in posting what I did……views on this subject are heavily influenced by where you reside.

Anecdotally….I recently updated the metrics and data on all my holdings and Tech has seen a 3% increase over one month prior. Interestingly, VADDX (equal weight S&P) is now up 20% on the year, which suggests the gains are much more widespread, even when rebased to GBP. At this rate I may be into contrarian territory before long. :) Actually, I'm wondering if there isn't a case for splitting my US allocation between market weighted and equal weights, whereby managed funds and global index use market weights but the US Index, used to bulk up my US allocation, is equal weight. It seems to me that all the risk is in my Fidelity Index, which is standalone US and equal weight would dilute that risk without reducing the US allocation. More volatile, yes, higher charges, yes but far less concentrated, yes.

Linton

https://forums.moneysavingexpert.com/discussion/comment/82021046#Comment_82021046

A problem with basing your investment strategy on the views of all investors is that a high proportion of those investors are US based who, according to Wikipedia, have a much stronger home bias than investors based elsewhere. The figures given are 78% for the US compared with 46% for the Eurozone and 19% for the UK.

This effect is being accentuated by the rise in use of global trackers which lead people to invest in a higher proportion of foreign stocks than they would if they chose their stock holdings themselves.

chiang_mai

Regardless of the US market percentage allocation, the US Tech sector issue can be mitigated by pairing an equal wieght index tracker with a market weight index tracker, on say a 30% to 70% ratio. Apprently this is not an uncommon strategy. It reduces Tech sector concentration and increases the allocation to Mid Caps, whilst still capitalising on rapid tech sector growth but providing greater downside protection if market fall, without sacrificing US market share of your portfolio. Staying with just the market weighted version would mean greater upside, but dividing between the two, means less downside, albeit with higher volatility. For me and my desire to be risk averse, it's a case of, what's not to like.

Bobziz

https://forums.moneysavingexpert.com/discussion/comment/82021140#Comment_82021140

Does your risk aversion relate to how the eventual recipient/s of your money will use it ?

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/82021168#Comment_82021168

My wife is a saver and a landowner in these parts, any spare cash she comes across goes into buying more land…..I fully expect the money I leave her will go the same route, that's fairly risk averse for these parts.

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/82021123#Comment_82021123

Yup, fair point, and "for the most part" in my post was because I do underweight the US and, aside from some UK equity income, spread the excess reasonably evenly across the other geographies. I was thinking more of index/active investing when I wrote that, since I now index invest with just a couple of small ETF exceptions (AVSG and DEM, the latter of which I question myself about).

AlanP_2

https://forums.moneysavingexpert.com/discussion/comment/81872810#Comment_81872810

This, the ring fenced play thing part, is I think a key point that applies to some people and not to others.

If you are not DEPENDENT on investment performance you can afford to take more investment risk if you are that way inclined.

We are not dependent on investment returns for our standard of living, holidays or whatever we want within reason so have taken the opposite view to you. We have won the game and so the loose "target" is to beat CPI thus at least maintaining the value of our assets. In reality we are well ahead and our net worth is increasing despite my best efforts to spend money 😂.

That is great for us, and those who are similarly fortunate, but is leading to a greater concentration of "wealth" in the hands of a relatively small proportion of the population which over the last couple of decades has led to increased inequality and feelings of "missing out" and being "left behind" with significant numbers of people (same in the US from what I've read).

Results of this include Brexit vote outcome, Reform etc. doing well, MAGA and so on - SOMETHING DIFFERENT to what has been there before. It may not be better but at least it is not the same old, same old.

AlanP_2

This is not meant as a criticism of the OP and his methods and objectives by any means (I enjoy the analsys and thought that goes into their posts) but to me highlights the inconsistency and danger of quoting and comparing investment returns either against an individual or the "average investor".

The OP targets 12-15% a year BUT that is from a small proportion of their overall investable assets.

Myself,and I'm sure others, measure the overall return from all our investable assets.

It's so easy to be in an "apples and oranges" situation without realising it. I'm sure we've all seen quotes along the lines of:

"I got an easy 20% return last year and can't understand how other people could fail to get that".

Later on it comes to light that they also have 30% in cash /PBs and a rental property for example so their overall return on investable assets is more likely nearer 10% in reality.

Identify your objective / target and use a consistent method to measure your performance ignoring what everybody else achieves makes sense to me.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/82021578#Comment_82021578

By way of explanation and clarification: All my assets are invested to the maximum that my peculiar situation will allow. I live in Asia where as a foriegner, in country investing options are very limited. I am also required to keep more than a small amount of cash on hand, in order to maintain my long term visa….bank interest rates are extremely low. I keep fairly large amounts in the UK but again I am limited in how I can invest, because I am not resident. So the rate of return I quote on my investments (I realised 20% this past year), is the rate of return on cash that has been deployed, rather than assets that are held hostage by circumstance. Fortunately, my income streams from pensions and bank interest are sufficent to adequatly fund my lifetsyle, hence, I am not driven to improve the return on assets that are currently non performing. I suppose I could open accounts in offshore locations to maximise my investemtn returns but having been down that road previously, I am no longer inclined, at my age, to prod the tax dragon, nor to endure the scrutiny and administartive overheads of those accounts (I would need Wills for each of the territories plus my host country Revenue Department would start to look at me strangely).