Smarter Investing: Simpler Decisions for Better Results (Financial Times Series)

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A solid slug in equities still offers some growth however, while the enlarged UK position reduces currency risk. When considering your plan, remember that each asset class should play a strategic role in your portfolio. Please note that these investment portfolio examples are not investment advice, a recommendation, or an inducement to buy or sell financial instruments. If you’re unsure of the risk or suitability of an investment, seek advice from an independent financial adviser. Build upon the basics Rather than the more general risk scenario where people have to draw a reduced DB earlier because they’ve run out of “bridge” before DB commencement age?

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Swensen’s model investment portfolio is much better diversified than Markowitz’s but that doesn’t always work to your advantage. UK equities, emerging markets, and property have endured a tough 15 years or so versus the developed world. I believe a more thought provoking book is The Permanent Portfolio: Harry Browne's Long-Term Investment Strategy which explains the idea of building a portfolio for all possible economic outcomes. Even that doesn't cover these strange times when investment asset values look artificially high as the Federal Reserve in particular continues its experiment in Quantitative Easing. The obverse is something in this portfolio will almost always be causing you pain. So you have to be able to view the portfolio holistically, or else you’ll resent it like carrying around a big umbrella on a sunny day. Just put a couple of those portfolios into InvestEngine to potential trial them ahead of big decisions. It is frustrating how platforms don’t necessarily offer the lowest cost ETF and the next best can be significantly more in OCF e.g.0.13% HSBC vs 0.20% iShares/SSAC in the RFA portfolio.Seems that JPLG has more of a smaller bias. It’s largest holdings are 0.3%, whereas FSWD has FB, Apple, Exxon, MSFT, Cisco, Walmart all above 2% each… All-World’s lowest point in 2022 is -13.6% vs -8% for RFA portfolio (this is 60/10/10/10/10 version). NB: A negative weighted average yield to maturity figure, therefore, results in a nil bond allocation. So take the time to think about who you are and what you’re trying to achieve. If you don’t know yet, then the Markowitz portfolio is a great place to start.

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FWIW, I am now over 6.5 years RE and recently started my DB pension – around four years ahead of my baseline plan at retirement. I have always used a floor and upside approach; so carried a relatively large amount of non-equities into retirement. This book is a 'must read' for anyone with personal, trust or pension assets to invest', Mark R Richardson, former CEO Chase Asset Management Is % allocation figure generated after steps 1. and 2. greater or less than 10x the portfolio bonds’ weighted average yield to maturity? ZXSpectrum48K #48: on your first paragraph – IIRC you’re a fixed income investment professional, so I’m not sure your portfolio’s performance is very relevant to these standardised portfolios :). Certainly a basic 60/40 S&P500 / US Treasuries buy and hold portfolio with annual rebalancing has not outperformed a 100% S&P500 portfolio over that time period. The purpose of adding bonds is not to outperform in any case, as you know. Intriguingly, from 1870, UK government bond yields only made it past the 5% yield mark from 1960 – 2002 (and now of course).https://am.jpmorgan.com/gb/en/asset-management/adv/products/jpm-global-equity-multi-factor-ucits-etf-usd-acc-ie00bjrcll96 That is, I really needed less annual flooring for less years in the Gap from RE to starting my DB; a two-fold effect (or double-positive if you prefer). For a variety of reasons I then decided to take my DB early once it provided enough to cover, at least, the ‘essentials’ . Which means I have ended up with even more floor assets in the Pot outside the DB scheme. The truth is there is no one portfolio to rule them all. Whichever load-out ‘won’ the last decade or three is unlikely to top the podium in the future. I guess its unrealistic to expect the free trading platforms to offer us everything but I like InvestEngine’s portfolio features and am considering it for managing my GIA post TFLS crystallisation. Even more attractive if they eventually offer SIPP albeit at a charge.

Smarter Investing By Tim Hale | Used | 9780273722076 | World Smarter Investing By Tim Hale | Used | 9780273722076 | World

Note, we’ve used a money market fund in place of cash, but high-interest savings accounts will do just as nicely. We’ve also included shortcuts with each to a comparable portfolio on the low-cost InvestEngine platform, as an illustration. 1 Disadvantages include that no matter how old or cautious a person is they’d never have less than 50% in shares, or more than 50% in bonds. Clearly this would not to everyone’s taste. A possible advantage is that step 3. keeps the bond allocation % in line with the weighted average yield and, therefore, hopefully preserves some semblance of risk to reward if bond yields tumble and prices rise. It tries to guard against what had gone ‘wrong’, if you will, with bond yields by the end of the 2009-2021 (or, depending upon the length of one’s perspective, the 1981-2021) bond mega rally. The 2013 Nobel Prize for Economics went to three people - Eugene F. Fama, Robert J. Shiller and Lars Peter Hansen. Potential tweaks? If you’re a fan of gold then you could swap it in for half or all of the portfolio’s broad commodities exposure.

The rule of 72 is a useful guide to compounding. You divide 72 by the % change so at a 5% growth rate an investment would double in just over 14 years, and another 14 years to double again (up to 400%). If you only net 3% because of charges, it takes 24 years to double. i.e the financial services industry gets rich but you don't. c-strong. Of course, 100% equities is a valid portfolio choice but then so is 0% if annuities or linkers do the job. An article like this though isn’t really helping if you choose a polar benchmark (like 100% of anything). It would be a very short article though! Mr H – My approach is to consider 1 years worth of spending cash plus any cash kept as emergency fund separate from portfolio. Any cash beyond that counts towards the cash allocation of my portfolio.

Tim Hale’s Smarter Investing – What’s new in the 3rd edition Tim Hale’s Smarter Investing – What’s new in the 3rd edition

I’ve chosen them because each offers a different perspective on asset allocation that you can customise to suit your personal financial objectives, circumstances, and temperament. That’s the longest timeframe I can get for a representative combo of ETFs. It’s not clear to me how justETF’s portfolio tool handles rebalancing.

I’ve tried to provide a more rounded picture of the performance of traditional portfolio diversifiers here. To a fair extent it supports your decision to keep a slug in cash, but it also shows that bonds help too. Why does this matter? Because the world is awash with "funny money" created by the central banks and combined with interest rate suppression, it has pushed up asset values to levels that are difficult to support. Have you ever considered looking at Trend Following funds as a valid fixed allocation segment for a portfolio? (like in Chris Cole’s Dragon Portfolio)