Balancing Equities / Bonds

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Devenish
Devenish Posts: 16 Forumite
in Savings & investments
Hello,
I am in the process of selecting investment funds and have been told "Perceived wisdom is to allocate 100% minus your age in equities, and the rest in lower risk or at least diversifying areas like fixed income".
Have you heard of this and what do you think of it?
By the way, we have no intention to ever retire and are both in very good health.
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  • HappyHarry
    HappyHarry Posts: 1,588 Forumite
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    Devenish wrote: »
    Hello,
    I am in the process of selecting investment funds and have been told "Perceived wisdom is to allocate 100% minus your age in equities, and the rest in lower risk or at least diversifying areas like fixed income".
    Have you heard of this and what do you think of it?
    By the way, we have no intention to ever retire and are both in very good health.

    I think it's a poor idea. Many 65 years olds' I know have a healthy appetite for risk and are looking to run their pension funds for another 30 years. Holding only 35% in equities would really not be appropriate.

    A better option is to be clear on your attitude to risk, build a portfolio that reflects this, and review both the portfolio and your attitude to risk on a regular basis.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • lpgm
    lpgm Posts: 355 Forumite
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    Shares and bonds used to move in different directions much more, and complemented each other quite nicely. It's not so clear cut anymore. Personally, I've never bought a bond, but I've got plenty of cash instead to cushion the shares. I'm in my mid 40s and not earning anymore, so I still need a big slug of shares to see me through.
  • Keep_pedalling
    Keep_pedalling Posts: 16,636 Forumite
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    I am 64, have no bonds, 15% cash, 85% equities. Pensions though are FS ones, which together with my SP next year provides a high level of security, so I am not so risk averse with my savings.
  • Prism
    Prism Posts: 3,803 Forumite
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    Nothing but equities are going to get me where I want to be in 20 years so I'm 100% at the moment. I intend on gradually shifting towards bonds or cash in about 10 years time but don't envision taking it below 60% equities during my retirement.
  • BLB53
    BLB53 Posts: 1,583 Forumite
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    Much will be determined by experience and temperament. Someone aged 30 yrs may not cope well with 70% equities...some experienced 70 yo can handle 80% equities.

    Investing is is always a compromise between risk and return so I would ignore the 100-age and find a mix with which you feel comfortable and can give you the returns you are prepared to accept for the risk you are
    willing to take.
  • Alexland
    Alexland Posts: 9,653 Forumite
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    edited 13 June 2018 at 8:34PM
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    I believe the old 100-age dates back to when people would buy annuities so the amount of money they had at the start of of retirement really mattered. So it would cause a 65 year old to reduce down to 35% equities. Now more people are going into draw down they need to maintain a higher equities proportion throughout their retirement to give them the return to match an annuity income.

    Regardless of age consider the equities volatility, decide how much you want in bonds and cash, and become more cautious in the years leading up to the withdrawal date. Similar to Prism I don't expect to go below 60% equities at any point during retirement and need enough equities to get us where we want to get to.

    Alex.
  • Ceme3000
    Ceme3000 Posts: 217 Forumite
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    How would you feel if 50% of your investments are wiped out tomorrow, and it takes 2 years to recover? Just decide what risk you are happy with and invest accordingly.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Devenish wrote: »
    By the way, we have no intention to ever retire and are both in very good health.

    My late mother took keep fit classes until she was 86 (61 years in total). In the end her feet were her downfall. Otherwise she'd would have kept on going. Catches up with us all in the end.
  • jimjames
    jimjames Posts: 17,624 Forumite
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    Devenish wrote: »
    Hello,
    I am in the process of selecting investment funds and have been told "Perceived wisdom is to allocate 100% minus your age in equities, and the rest in lower risk or at least diversifying areas like fixed income".
    Have you heard of this and what do you think of it?
    By the way, we have no intention to ever retire and are both in very good health.

    I'v heard of it and taken no notice at all. According to that I should have 50% bonds, I have 0%.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    Keep_pedalling wrote: »
    I am 64, have no bonds .. Pensions though are FS ones, which together with my SP

    Well, yes. FS pensions and SRP are just a very superior sort of bond.
    Free the dunston one next time too.
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