Portfolio split

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sebo0607
sebo0607 Posts: 41 Forumite
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in Pensions, annuities & retirement planning
Hi all,

I know this is all down to personal preference and attitude to risk but given the current climate I think I may have to much invested in equities. I am looking to retire early at 55, which is 7 years away. My current portfolio is roughly split as follows:

Deposit savings - 25%
Equity ISAs - 25%
Sipp Equity funds - 50%

This gives me 75% exposed to stock market fluctuations i.e. falls. I am thinking of moving some of the equity isa to a cash fund to reduce my exposure.

I would be interested in thoughts.

Thanks
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  • Albermarle
    Albermarle Posts: 22,134 Forumite
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    If you are looking to retire in 8 years and the markets seem to be coming to the end of a bull run , then 75% equities seems high ( in my opinion)
    There are more alternatives though than just cash . If you hold cash in the SIPP you will get zero or almost zero return .
    Have you though about bond funds; multi asset funds ( with <75% equity ) or defensive investments like Absolute return funds or certain Investment trusts .
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Will you meet your personal objectives with this split? Cash is likely to return a below inflation rate. Equities will have to perform well to compensate.
  • SonOf
    SonOf Posts: 2,631 Forumite
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    Are you actually invested 100% into equities with your risk-based investments?

    It is unusual for an average consumer to use 100% equity based in their investments unless it is by mistake or by choice. Most people end up with multi-asset solutions which will have an allocation to fixed interest securities and property as well as equities. It is also very common for people to refer to their investments as stockmarket when a good chunk of them won't be.

    So, have you checked the underlying assets and are you sure you are 100% equity?
  • Moe_The_Bartender
    Moe_The_Bartender Posts: 1,512 Forumite
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    I retired nine years ago at 61. My IFA pointed out that as there was no longer any requirement to purchase an annuity at 75, my investment horizon was the date of my death and advised to invest 100% in equities. I'm very happy that I took his advice as I have lived comfortably and grown my pension pot at the same time. I have now taken a more defensive stance as I no longer need growth.
    The fascists of the future will call themselves anti-fascists.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    I'd probably reduce your cash and equity allocation and put some money into a high quality global hedged bond index fund. I'd probably have something like 70% equity and 30% bonds in your non-cash allocation as this has historically produced a good balance between risk and reward.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    edited 19 September 2019 at 2:37PM
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    Moe_The_Bartender wrote: »
    I retired nine years ago at 61. My IFA pointed out that as there was no longer any requirement to purchase an annuity at 75, my investment horizon was the date of my death and advised to invest 100% in equities. I'm very happy that I took his advice as I have lived comfortably and grown my pension pot at the same time. I have now taken a more defensive stance as I no longer need growth.

    Depending on the amount of income you need wrt the size of your pension pot it can be risky to go into retirement with a 100% equity portfolio because of sequence of return risk; a stock crash early on combined with withdrawals could severely reduce your lifetime withdrawals. However, a rising equity allocation as you get further into retirement has been shown to be a good strategy that has a higher probability of supporting a given withdrawal than a constant or falling equity allocation. It can also give you a higher ending value to pass on.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • sebo0607
    sebo0607 Posts: 41 Forumite
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    SonOf wrote: »
    Are you actually invested 100% into equities with your risk-based investments?

    It is unusual for an average consumer to use 100% equity based in their investments unless it is by mistake or by choice. Most people end up with multi-asset solutions which will have an allocation to fixed interest securities and property as well as equities. It is also very common for people to refer to their investments as stockmarket when a good chunk of them won't be.

    So, have you checked the underlying assets and are you sure you are 100% equity?

    Hi thanks,

    You are correct the pension is not wholly equities it's a 70/30 split. I have forgot about that so it's a little more balanced.
  • sebo0607
    sebo0607 Posts: 41 Forumite
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    bostonerimus wrote: »
    I'd probably reduce your cash and equity allocation and put some money into a high quality global hedged bond index fund. I'd probably have something like 70% equity and 30% bonds in your non-cash allocation as this has historically produced a good balance between risk and reward.

    Thanks for the reply, I will do some research and look at the options rather than putting more into cash.
  • sebo0607
    sebo0607 Posts: 41 Forumite
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    Albermarle wrote: »
    If you are looking to retire in 8 years and the markets seem to be coming to the end of a bull run , then 75% equities seems high ( in my opinion)
    There are more alternatives though than just cash . If you hold cash in the SIPP you will get zero or almost zero return .
    Have you though about bond funds; multi asset funds ( with <75% equity ) or defensive investments like Absolute return funds or certain Investment trusts .

    Hi thanks,

    I have not looked at any other funds, I do have a multi asset fund in the sipp but not the ISA's. I will certainly have a look at absolute return funds.

    Thanks
  • JohnWinder
    JohnWinder Posts: 1,788 Forumite
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    'If you are looking to retire in 8 years and the markets seem to be coming to the end of a bull run , then 75% equities seems high ( in my opinion)'
    If 'retire' means buy an annuity then 8 years might be a bit short to be 75% equities (unless that 75% represents a king's ransom). But if 'retire' means start living of your investments for the next (you'll be 55 yrs old) let's say 30 years, then you'd be well served with a high equity mix (unless you've got oodles of money and don't need better returns).
    ' I will certainly have a look at absolute return funds.'
    When you do, be sure to compare their costs with a passive index tracker, and maybe read about them in Tim Hale's Smarter Investing (make sure it's the first edition). He's not a fan.
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