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  • FIRST POST
    • aajax42
    • By aajax42 3rd Jan 18, 10:40 AM
    • 65Posts
    • 7Thanks
    aajax42
    How much is enough?
    • #1
    • 3rd Jan 18, 10:40 AM
    How much is enough? 3rd Jan 18 at 10:40 AM
    I have been following this forum with great interest for a long time and viewed so many posts about how to save and invest. I don't remember ever seeing a post that explores 'how much is enough'? According to Which, Households spent a shade under 2,200 a month, or around 26,000 a year, on average.
    Of course everyone will have different aspirations, but it seems saving can become an obsession that may mean sacrifices made today were not necessary. How do you know how much to save/risk unless you have a target?

    John D. Rockefeller. When asked once, "How much money is enough money?" He replied, "Just a little bit more."

    So, do any of you wise investors have a target. I am interested because I am now 64 with a household income of around 40,000 after tax and savings of nearly 400,000. Should I risk that in investments to make more, or let it stay safe in cash, even if it is losing value through inflation?

    Do you have targets?
Page 2
    • Murmansk
    • By Murmansk 3rd Jan 18, 7:50 PM
    • 75 Posts
    • 20 Thanks
    Murmansk
    Well I'm 56 and get 380 per month from the Local Govt Pension Scheme and am trying to make some money on a self-employed basis. I'd be glad to taking in the 1,100 per month I got before I left the charity I worked for to move to the seaside for a new life.

    To me, 1,500 per month would make me feel really rich!!
    • Linton
    • By Linton 3rd Jan 18, 9:26 PM
    • 9,395 Posts
    • 9,528 Thanks
    Linton
    Not too bad a choice, you could just put all your money in RIT - ROT Capital Partners - this from their web site:

    "1,000 invested in RIT at inception in 1988 would be worth in excess of 30,000 today, compared to ~6,500 if invested in the ACWI. In the last three years (to June 30th 2017) share price total return has been over 50%."

    "RIT Capital Partners plc is an Investment Trust chaired by Lord Rothschild, which aims to protect and enhance shareholders wealth over the long term.
    Since listing on the London Stock Exchange in 1988, we have generated a share price total return of 12.9% per annum for our shareholders."
    Not many people could claim 12.9% per year over the last 30 years.
    Originally posted by capital0ne
    I think you may have missed the point of a Wealth Preservation Portfolio. To make it clear the objective is to be able to continue my lifestyle during a major crash lasting several years. But in the meantime the portfolio must at least match inflation.

    RIT Capital Partners is the least certain long term component of my WP portfolio. During the 2008/2009 crash it dropped around 20% whilst the other WP funds I hold barely twitched. It is only there because it has a stated objective of Wealth Preservation.

    Investing isnt about maximising return, it's about meeting objectives.

    But you must not put all your hard earned finds into a single investment - it must be spread around.

    You can co this easily with four or five investments in to cover UK, Global equities, Property, Bonds and cash. (bonds may be too risky at the moment)

    People will tell you it's too hard, but in reality it isn't.

    They will also tell you to pay an IFA - you can do it yourself easily
    What isnt so easy is to identify your objectives and assign the appropriate allocation of investments to meeting them. That is why some people need an IFA. Real life investment with life changing amounts of money cannot be reduced down to selecting an xx in VLSxx.

    They will say 4 or 5 investments in your balanced portfolio isn't enough, you'll be given examples with 10-15 selections. Pointless - all you've achieved is an expensive tracker fund
    The WP portfolio isnt intended to be "balanced". It is intended to take advantage of the best active management skills I can find to achieve the objectives whilst avoiding excessive dependence on any one manager/sector/asset type.

    My Growth 100% equity portfolio consists of 12 active funds individually chosen to provide the asset allocation I want. It is very far from being a global tracker - for a start it's more than 50% medium and small companies. So far it has outperformed VLS100 every year.
    • capital0ne
    • By capital0ne 3rd Jan 18, 11:42 PM
    • 524 Posts
    • 254 Thanks
    capital0ne
    My Growth 100% equity portfolio consists of 12 active funds individually chosen to provide the asset allocation I want. It is very far from being a global tracker - for a start it's more than 50% medium and small companies. So far it has outperformed VLS100 every year.
    Originally posted by Linton
    Can you list them please?

    Not too hard to outperform VLS100 tho'
    • Eco Miser
    • By Eco Miser 4th Jan 18, 3:07 PM
    • 3,444 Posts
    • 3,234 Thanks
    Eco Miser
    If all that scrimping and saving, worrying about the price and looking for bargains means more for the taxman, or donations to charity then it definitely wasn't worth it.
    Originally posted by aajax42
    if I die tomorrow, then it wasn't worth it (except I would probably have worked an extra six years, and be worrying if I have enough). If, on the other hand, I'm still alive and active at 107 (40 years from now) and still can afford to buy what I want when I want it, who cares if the taxman is going to take a cut (though there are ways to mitigate that), and I can think of several local charities and non-for-profits that could benefit greatly from a bequest.

    Unless you know the date of your death and can plan to spend everything by that date exactly you will either run out of money, or have some left over. I definitely prefer that last option.
    Eco Miser
    Saving money for well over half a century
    • Linton
    • By Linton 4th Jan 18, 3:27 PM
    • 9,395 Posts
    • 9,528 Thanks
    Linton
    Can you list them please?

    Not too hard to outperform VLS100 tho'
    Originally posted by capital0ne
    http://forums.moneysavingexpert.com/showthread.php?t=5719527&page=2

    See #34
    • capital0ne
    • By capital0ne 4th Jan 18, 7:29 PM
    • 524 Posts
    • 254 Thanks
    capital0ne
    Linton Growth: 106078
    Linton Wealth preservation: 101419

    Out of interest VLS100 - 100000/103016/102655/104727

    Note that in the past month (5th December) I sold out of one fund in the Growth portfolio and distributed the proceeds to a couple of the others. I also added in 200 spare cash. How to deal with this on the Invest-off isnt clear. What I did was....

    1) Reset the % fund allocations to match what the actual portfolio was showing on the 6th December.
    2) Reset the total in the Invest-off portfolio to match the Internal Rate of Return on the actual portfolio since 30th September up to the 6th December.

    New allocation:

    Artemis Global Growth - 18.5%
    Schroder QEP US Core Inst Acc - 15.9%
    Threadneedle European Small Companies - 11.78%
    Fidelity Asian Values Trust - 9.62%
    F&C US Smaller Companies C Inc - 7.74%
    Jupiter European Opportunities Trust - 7.47%
    JPM Natural Resources C Acc - 7.09%
    Baillie Gifford Japanese Smaller Companies B Acc - 5.79%
    Marlborough UK Special Situations - 5.14%
    Blackrock Frontiers Investment Trust - 4.33%
    Neptune UK Mid Cap C Acc - 4.07%
    AXA Framlington Health Z Acc - 2.57%

    Not too large a portfolio then

    Cheers
    • Trentenders
    • By Trentenders 4th Jan 18, 7:41 PM
    • 1,152 Posts
    • 719 Thanks
    Trentenders
    Once you have 25x your annual spend you have enough to live on forever...
    • Eco Miser
    • By Eco Miser 6th Jan 18, 4:35 PM
    • 3,444 Posts
    • 3,234 Thanks
    Eco Miser
    ... assuming your investments return a consistent 4% p.a forever.
    Which might not happen.
    Eco Miser
    Saving money for well over half a century
    • capital0ne
    • By capital0ne 6th Jan 18, 7:02 PM
    • 524 Posts
    • 254 Thanks
    capital0ne
    ... assuming your investments return a consistent 4% p.a forever.
    Which might not happen.
    Originally posted by Eco Miser
    True, but S&P500 index (or tracker) has returned an average 7%+ since 1950
    • moneyfoolish
    • By moneyfoolish 6th Jan 18, 8:49 PM
    • 502 Posts
    • 295 Thanks
    moneyfoolish
    A question to which there is no answer as it depends on the income coming in and the spending going out! I've always worked on the principles my parents followed which was to never have any debt other than a mortgage. Luckily, I always had a reasonable salary and could save more than we spent. We had paid off our mortgage before I retired in in September, 2013 at the age of 68. In the 4 years or so since I retired we have increased our standard of living in terms of more holidays, eating out a lot more and generally spending more to the point where we now more or less spend all of our income without reducing or increasing our savings. However, if I ever found that my income couldn't support that standard of living things like holidays would be cut very swiftly. One thing I do know is that I'm far, far better at cutting my expenditure than I am at increasing my income!
    • Eco Miser
    • By Eco Miser 8th Jan 18, 2:43 AM
    • 3,444 Posts
    • 3,234 Thanks
    Eco Miser
    Once you have 25x your annual spend you have enough to live on forever...
    Originally posted by Trentenders
    ... assuming your investments return a consistent 4% p.a forever.
    Which might not happen.
    Originally posted by Eco Miser
    True, but S&P500 index (or tracker) has returned an average 7%+ since 1950
    Originally posted by capital0ne
    So you only need 15 times your spend if you invest in the S&P500? (and start in 1950)
    The period 1968-1982 would have been 'fun' though.
    Eco Miser
    Saving money for well over half a century
    • bowlhead99
    • By bowlhead99 8th Jan 18, 5:37 AM
    • 7,978 Posts
    • 14,516 Thanks
    bowlhead99
    ... assuming your investments return a consistent 4% p.a forever.
    Which might not happen.
    True, but S&P500 index (or tracker) has returned an average 7%+ since 1950
    Originally posted by capital0ne
    Originally posted by Eco Miser
    So you only need 15 times your spend if you invest in the S&P500? (and start in 1950)
    The period 1968-1982 would have been 'fun' though.
    Originally posted by Eco Miser
    Of course, basic averages tell you nothing - a key point is that you have to be aware of, and budget for, a buffer for 'sequence of returns' risk.

    For example, 4% drawdown plus 3% inflation neatly fits into a 7% return. You might think that sitting there age 40 in 1950 and wanting to fund early retirement by spending 400 per year of your 10k pot (plus inflation), you could just coast through to today age 107 and ready to pop your clogs, having retained the capital in real terms to pass to your heirs.

    With that plan, you will be fine if the returns from 1950 go +7%, +7%, +7%, +7% and so on for 67 years without a blip. Someone not drawing down from the pot at all would see their 10k turn into 930k nominal, while someone drawing down 400 plus inflation every year would have had no issues doing that and seen the 10k capital be preserved in real terms.

    However what if instead of getting +7%, +7%, +7%, +7% and so on for 67 years, you instead get -1%, -1%, -1%, -1% and so on for 66 years and then +17960% in year 67? Mathematically it is still the same 7% annualised return; if you hadn't touched the pot, the 10k starting money would still turn into 930k nominal. But if you were drawing down 400 a year you would not have even made it half way through the time period before being flat broke; because you lived through some excessively lean early periods and don't make it to the good period(s) later.

    Nobody is expecting 66 lean periods in a row before one mega-payoff year. But when you talk of '7% average' from equities, you have to be clear that some years it is +50% and other years it is -50% and that is not comparable with a reliable 7% every year, for planning purposes.

    If it is -50% one year (which it will be at some point, if you're fully in equities and only allocated to one single market), and then you draw out 4% of your original '100' pot for two or three years running, you are then left with only about 40% of the previous balance, so when it rebounds by doubling the next week (market goes back up from 50 to 100) you only go back up to 80 instead of 100 and it's like you've taken five years' money out of the portfolio in only two and a half years. That sort of volatility can seriously mess up your plans.

    Planning for the sequence of returns risk is recognising that +100%, - 50% when you are drawing money out of a portfolio, is very different from -50%, +100%, even though with no drawdown it would leave you in mathematically the same place.

    Also, regardless of the above, capital0ne's comment that "S&P index (or tracker) has returned 7%+ since 1950" should also be taken with caution in any case:

    - the tracker would not return as much as the actual index (not that trackers existed in the 1950s anyway)

    - you would not have known to put all your money in the index that happened to be the best performing one in the western world over that time period; others were worse.

    - a dollar return to US investors may be a quite different return when converted back to sterling for UK investors.
    Last edited by bowlhead99; 08-01-2018 at 5:46 AM.
    • Linton
    • By Linton 8th Jan 18, 9:32 AM
    • 9,395 Posts
    • 9,528 Thanks
    Linton
    Linton Growth: 106078
    Linton Wealth preservation: 101419

    Out of interest VLS100 - 100000/103016/102655/104727

    .......

    Not too large a portfolio then

    Cheers
    Originally posted by capital0ne
    The thread you quoted from has standardised on a 100K portfolio for reporting purposes. It has nothing to do with the actual size.
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