Doom scrolling and the next financial crash!

GeoffTF

I am doing almost nothing as usual. (I spent most of the morning doing it, but that was just moving a little money al collecting a couple of statements.) Equities 64.5%, cash and bonds 35.5%. Equities are global market cap, but with the UK at 15.2%. Weakening my diversification by thinning the US has never made much sense to me. The equity markets will crash, but nobody knows when or what the trigger will be.

noclaf

Around 2 years back, I tweaked my S&S ISA allocation to include a gold tracker, some bonds and overweight the UK. I also used the ex-USA x-trackers ETF mentioned earlier to reduce/control my US allocation and think the additional diversification worked well but find it mentally fatiguing to keep an eye on it all so earlier this year sold up and whacked the whole lot into FWRG. I may still tweak again but the problem is I don't know when the bubble will burst and no idea the level of markets 'contagion' or knock on impact so question whether my diversification efforts would be in vain anyway?

I am less concerned about pensions/longer term investments that I can't access till 57/60 but the ISA is the one that psychologically is harder as it's accessible money and would definitely feel the pain of for example a 40% drop...though if it happens perfectly timed just before next years ISA allowance reset in April then would of course help :)

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82105608#Comment_82105608

I'm going to sell some of my tech heavy equity index funds equaling 20% of my portfolio and move it into Value Index Fund that has a small tech allocation and some in a MMF. It's time to tilt away from tech.

aroominyork

Good on ya for admitting - after years of relentlessly posting "just buy the index" - that every rule has its time for exceptions. Finding value without tech is surprisingly unstraightforward: I used to hold PSRW (before moving to small cap value AVSG), but its top ten include the usual suspects: Apple, Microsoft, Meta, Samsung, Amazon, Alphabet, Intel.

masonic

It's interesting to see the dominoes falling.

I didn't let my US exposure grow above 50%. Today it sits just above 45%, but a portion of that is from small-cap value (via the same AVSG). I also diversified into commodities futures, before the 30% surge thankfully.

The larger change I made was loading up on index linked gilts for the most part as a liability driven investment (future annuity). That's the only change that hasn't given me a short-term benefit, as I bought a few percent dearer than today's price. That last change has more to do with redressing an imbalance from the days where bonds offered return-free risk.

Those changes take my overall equities down to 55%ish. This is the portfolio that I will take into retirement and I expect I will now sit on my hands unless there is a major crash where I'll consider rebalancing into equities.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82106102#Comment_82106102

You only ever know what was "right" in hindsight. I still think that "buying the index" is a good idea, but the index must be sensible. Five years ago my US Equity Index (VTSAX) had 24% tech stocks and today that is approaching 40%. So I've moved some of it into a US Equity Value fund (VVIAX) with 12% tech and some into a MMF so I'm now 25% cash…not exactly "parking the bus" but definitely being defensive. My International Equity Index fund (VTIAX) has about 20% tech so I don't feel inclined to mess with that.

Before the adjustments, 23% of my entire portfolio was in US and international tech stocks, after it should be ~16%.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82106135#Comment_82106135

Being in the US I tend to emphasize US stocks, but probably not to the extent than many US investors do. I've kept my US to International equity ratio to 60/40 which is in line with capitalization and US Vanguard's suggestion. Over the past few years tech has gone from maybe 25% of the US total stock market to around 40% which has really biased US equity index portfolios. Now if I was stronger or younger I'd just be buying the market, but the hairs on the back of my neck are standing up and as I don't need stratospheric growth I've move into some Large Cap Value.

I do worry that what has worked for the last 40 years in the US ie. broad market equity index investing in now just becoming tech investing and so the diversification of previous markets is being lost. When/if the AI bubble deflates there will be many people with global equity funds in ISAs and DC pensions with big losses. If they stay calm things will probably recover, but many will panic sell and retirees might not have the time to recoup their losses.

aroominyork

the hairs on the back of my neck are standing up and as I don't need stratospheric growth

Are the heirs on the back of your neck also glad you are dialling down risk?

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/82106066#Comment_82106066

You have to be careful with value indexes though, something like the MSCI World Enhanced Value Index has a whopping 14% in Micron, so not great if you're trying to avoid tech and especially not AI!

GeoffTF

https://forums.moneysavingexpert.com/discussion/comment/82106135#Comment_82106135

I had a look at AVSG. TER 0.39%. Transaction cost will be high (relative to market weight) too. Spread not bad. Market cap only £942 million. Monday’s turnover was only £69,567. Recent performance has been close to that of VWRP, but it has underperformed in the longer term. Avantis? I had to look them up. AVSG does not look particularly attractive for me.

https://www.londonstockexchange.com/stock/AVSG/american-century-icav/company-page

https://www.justetf.com/uk/etf-profile.html?isin=IE0003R87OG3#overview