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    • El Selb
    • By El Selb 19th Apr 17, 10:17 AM
    • 73Posts
    • 17Thanks
    El Selb
    Cash:stock ratio
    • #1
    • 19th Apr 17, 10:17 AM
    Cash:stock ratio 19th Apr 17 at 10:17 AM
    I am looking to buy a house in perhaps 2-3 years time.

    I would like to grow my funds as much as possible whilst protecting what I've got. Okay stating the obvious!!

    I've got around 50:50 in cash:funds/trackers (VLS80, S&P, FTSE250 and a few other bits).

    I'm happy to accept a 10-15% loss on my pot (about 17k currently) in the quest for higher returns, but would be disappointed with much more.

    Wondering if it's worth increasing the stock:cash ratio or should I resist temptation?
Page 2
    • smiddle3
    • By smiddle3 19th Apr 17, 10:44 PM
    • 82 Posts
    • 3 Thanks
    I'm in a similar position to OP but without the strict 2/3 year timescale to buy. Considering putting 50% of current savings in equities and allocating 50:50 of future monthly savings to cash:equities as per Monevator article:

    Still unsure whether owning property is right for me and don't want to stay out of investing any longer than I have/need to while I decide. Thoughts?
    • Malthusian
    • By Malthusian 20th Apr 17, 9:32 AM
    • 4,113 Posts
    • 6,449 Thanks
    If you put it 100% in stocks, and there is a massive crash, then would you really want to buy a house straight away after? Or would you want to wait a couple of extra years for house prices to bottom out?
    Originally posted by Cogs44
    Well you probably aren't going to be able to so it's moot. House prices fell about 20% in the last crash, when shares fell by twice that, so I wouldn't count on a fall in house prices matching the fall in your stockmarket portfolio.

    What makes you think that house prices would bottom out a couple of years after the bottom of the stock market? In the last crash the bottom of the house market and the bottom of the stockmarket roughly coincided, while in the one before that, the dot com crash was virtually ignored by the house price index.

    I wouldn't put any faith in that kind of market timing. When you have enough money, buy a house. is littered with the bodies of perma-renters who thought they'd wait a couple more years until "sanity is restored to the market".
    • El Selb
    • By El Selb 20th Apr 17, 12:41 PM
    • 73 Posts
    • 17 Thanks
    El Selb
    Thanks all for your helpful comments.

    I should of said I already have a H2B ISA but of course am quite limited in what I can enter into that. I don't know much about the LISA yet but need to look into that... presuming there will be a similar sort of deposit limit though.

    Most of my savings were nearly entirely in stock till a couple of years ago when I started to save up to the 50:50 position I am now. Arriving here has prompted the question of what I do next.

    Reviewing your posts I think I'm happy enough for now maintaining this ratio. I still have no set plans (I really should firm up a target date/amount mind) but once I do perhaps I should/will get more cautious.

    AndyT I believe made the good point that I should really focus on my saving the 500 p/m on getting up to my goal, not necessarily the growth on assets held. Saving is where I have the most power to affect things if I could start trimming my holiday inclinations!

    One question. I have no bonds/fixed income (other than 1/5 of my VLS holding). Is that something I should look to once I've been round all the banks?
    • Malthusian
    • By Malthusian 20th Apr 17, 1:01 PM
    • 4,113 Posts
    • 6,449 Thanks
    One question. I have no bonds/fixed income (other than 1/5 of my VLS holding). Is that something I should look to once I've been round all the banks?
    Originally posted by El Selb
    Classically speaking, there should be at least some bonds in your portfolio as it reduces the ups and downs for only a small trade-off in potential returns.

    Practically speaking, yields on bonds are very low, and there is a good chance of the value falling when or if interest rates go up. I certainly wouldn't sell equities in order to buy bonds.

    That leaves the option of buying bonds with some of your cash, and I wouldn't be inclined to do that either. As per AndyT's post, an extra 1 or 2% in yield compared to cash is barely here or there in terms of meeting your goal, while the potential for a fall in bond values has too much power to damage it.
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