Risk spread - 50+ years old - Out of whack ??
Discussion
I'm just over 50 years old, plan to continue working for about years more.
I spent most my life investing in start ups, companies I work for and chucking in sensible amounts into my pension.
Of late I suddenly started feeling very nervous that my risk profile is way out of whack for someone my age, nealry half my worth is in medium to high risk areas, should this be closer to 25% ?
I plan to exit out of the more risky stuff, but what into ....holiday home...FTSE 100 equites (funds)...pay mortgage off (4.4%).
I spent most my life investing in start ups, companies I work for and chucking in sensible amounts into my pension.
Of late I suddenly started feeling very nervous that my risk profile is way out of whack for someone my age, nealry half my worth is in medium to high risk areas, should this be closer to 25% ?
I plan to exit out of the more risky stuff, but what into ....holiday home...FTSE 100 equites (funds)...pay mortgage off (4.4%).
- Risk Red, Amber, Green rating is based on possibility to drop in value medium term.
- I know I'm mad to have put 6 figures into a loan to a friend but nothing I can do but hope it comes good.
- Investment in small co is risky but currently pays decent dividends.
C69 said:
Wilmslowboy said:
I'm just over 50 years old, plan to continue working for about years more.
How many more years?It's just one small and one medium firm that you have shares in?
One small firm (profitable last 4 years but founder owned/ led plus 15 employees), I think id be happy sticking with this for 10 years.
oooh - great question, I track my totals but have never thought about it in terms of percentages, weightings, risk, and rebalancing as such.
My breakdown for comparison (Age 44 and 3/4) :
Based on this (and I guess the percentages only tell half the story as the absolute value probably means something as well), I would say that you are more balanced than me....
My breakdown for comparison (Age 44 and 3/4) :
- House Equity - 55%
- Pension - 33%
- Single stocks (from company shares) - 5.2%
- Cash 2.6%
- Cars 5% (all not depreciating)
Based on this (and I guess the percentages only tell half the story as the absolute value probably means something as well), I would say that you are more balanced than me....
You have 10 more years to recover losses than myself, therefore could carry more risk, I'm slowly switching into protect rather than grow mode.
fat80b said:
oooh - great question, I track my totals but have never thought about it in terms of percentages, weightings, risk, and rebalancing as such.
My breakdown for comparison (Age 44 and 3/4) :
Based on this (and I guess the percentages only tell half the story as the absolute value probably means something as well), I would say that you are more balanced than me....
My breakdown for comparison (Age 44 and 3/4) :
- House Equity - 55%
- Pension - 33%
- Single stocks (from company shares) - 5.2%
- Cash 2.6%
- Cars 5% (all not depreciating)
Based on this (and I guess the percentages only tell half the story as the absolute value probably means something as well), I would say that you are more balanced than me....
Wilmslowboy said:
You have 10 more years to recover losses than myself, therefore could carry more risk, I'm slowly switching into protect rather than grow mode.
Although I did read an article somewhere in the last month that dismissed the view that you should be tapering your risk approach as you cross the retirement threshold given that you might be retiring at 55 and living to 85. i.e. this is stillan investment timeframe of 30 years, so why would you put everything in cash and not leave it in stocks etc....
This made me think that having a big pot in one of those auto managed funds that transfers to cash as you get closer to 55 is actually not a great plan.
fat80b said:
Although I did read an article somewhere in the last month that dismissed the view that you should be tapering your risk approach as you cross the retirement threshold given that you might be retiring at 55 and living to 85.
i.e. this is stillan investment timeframe of 30 years, so why would you put everything in cash and not leave it in stocks etc....
This made me think that having a big pot in one of those auto managed funds that transfers to cash as you get closer to 55 is actually not a great plan.
I’d class managed funds are moderate to low risk (especially if diversified across sectors).i.e. this is stillan investment timeframe of 30 years, so why would you put everything in cash and not leave it in stocks etc....
This made me think that having a big pot in one of those auto managed funds that transfers to cash as you get closer to 55 is actually not a great plan.
I’ve never thought about risk / spread in percentage, good post.
Worked mine out for comparison. (Age 39) :
Worked mine out for comparison. (Age 39) :
- House Equity - 49%
- Pension - 39%
- Single stocks (company shares) - 3%
- Cash/isas 2%
- Tangable Assets (Cars) 7%
Why are you including house equity in your schematic? Assuming it’s your PPR I would exclude it, unless your plans include downsizing, therefore it would be more sensible to include an approximate net figure post downsize.
Risk is a personal thing. I’m 50 this year but 100% equity (listed securities and PE). I keep a cash buffer of course, but I don’t include that in my schematic.
I have cars (this is Pistonheads after all!) but don’t include these either.
I like my job so no firm plans to retire, I reckon i can handle another 10-15 years, again this increases my risk profile. But even if I was retiring soon, I would just reduce PE exposure and perhaps hold a bit more cash.
Risk is a personal thing. I’m 50 this year but 100% equity (listed securities and PE). I keep a cash buffer of course, but I don’t include that in my schematic.
I have cars (this is Pistonheads after all!) but don’t include these either.
I like my job so no firm plans to retire, I reckon i can handle another 10-15 years, again this increases my risk profile. But even if I was retiring soon, I would just reduce PE exposure and perhaps hold a bit more cash.
fat80b said:
Wilmslowboy said:
You have 10 more years to recover losses than myself, therefore could carry more risk, I'm slowly switching into protect rather than grow mode.
Although I did read an article somewhere in the last month that dismissed the view that you should be tapering your risk approach as you cross the retirement threshold given that you might be retiring at 55 and living to 85. i.e. this is stillan investment timeframe of 30 years, so why would you put everything in cash and not leave it in stocks etc....
This made me think that having a big pot in one of those auto managed funds that transfers to cash as you get closer to 55 is actually not a great plan.
There’s little point in me posting my % schematic on here as I’d estimate 50% is cash holding! Yes I know it’s being eroded by inflation but I’ll still likely snuff it with a large wedge, the FS pension helping in this regard.
Like others I don’t include the value of my house or cars as equity, the former will only benefit my beneficiary and the latter is money I’ve spent.
Mankers said:
Why are you including house equity in your schematic? Assuming it’s your PPR I would exclude it, unless your plans include downsizing, therefore it would be more sensible to include an approximate net figure post downsize.
I agree. A house is a "home" not an "investment". Once you've got one its value is pretty much irrelevant.Unless, as you say, there's a specific intention to downsize. But if you're going to downsize why have you still got a hefty mortgage to buy a house you don't actually want?
Panamax said:
I agree. A house is a "home" not an "investment". Once you've got one its value is pretty much irrelevant.
Unless, as you say, there's a specific intention to downsize. But if you're going to downsize why have you still got a hefty mortgage to buy a house you don't actually want?
I agree that a house is a home, but this thread is all about asset allocation and risk. For the purposes of this discussion, it does make sense to compare the split between home equity and other asset holdings that you have? Unless, as you say, there's a specific intention to downsize. But if you're going to downsize why have you still got a hefty mortgage to buy a house you don't actually want?
This is particular relevant at the moment with the current interest rates, and evidenced by the multitude of threads asking whether folks should prioritise mortgage vs savings......
Wilmslowboy said:
House equity is relevant, as it a relatively safe store of wealth and can be accessed in case of emergency.
I’d suggest having 50% of one’s wealth in home equity and 50% in equities is lower risk than 100% in equities.
Noted. But my thoughts are if you have to borrow against the value of the house in an emergency it would question your financial planning assumptions. I could see it with low mortgage rates and the access to a cheap loan for other investment streams but I’m (early) retired so my circumstances might be different and my appetite for risk v reward is set accordingly.I’d suggest having 50% of one’s wealth in home equity and 50% in equities is lower risk than 100% in equities.
Armitage.Shanks said:
That’s true but surely there comes a point when you want to actually enjoy those later life years and actually spend some money?
I don't normally post at 3am (dozed off, now 4am) but by coincidence with your question, I am sitting here spending some money, that will enable me to restart my enjoyment of retirement again.
A new knee was fitted yesterday, only 6 weeks after severe pain began.
Could hardly walk, so imagine an interruption to your enjoyable active retirement by having to wait, I don't know, perhaps 2 years.
Of course there is no answer to the whole conundrum, of spending and gifting money during retirement, because none of us know how long we are going to live.
We sometimes hear comments such as move equities into cash, or spend it at retirement age, because tomorrow we may be dead.
That in itself would be quite a big gamble, because say you were lucky enough to then have a long retirement.
Having spent and/or holding depreciating cash (receiving an interest rate that is never 'true real value' income), later life might become miserable and also financially worrying.
I used the strategy of not changing asset allocation at all after retirement. It has been satisfying to find that total dividend income has been increasing far faster, than the annual rises from a DB pension. Obviously involves risk, but so much of life also does.
I would like to gift more to my children, because otherwise a government will be spending it, but for how long will we need some of it ourselves? All very awkward, but having extra available rather than insufficient, seems the better bet to me.
Unfortunately an endless debate, that involving so many unkown aspects.
Worked mine out for comparison. (Age 53) :
Property Equity - 62%
Pension - 21%
ISA S&S -12.6%
Single stocks (company shares) - 0.3%
Cash 12.6%
Tangable Assets (Cars) 3.7%
property includes rentals/commercial as well as home. We have stopped working this year.
for the OP We have almost all of the pension/iSA in equities. Bonds have been poor on both sides of the scales recently ie they havnt protected the funds in a down turn and as another poster has said we hopefully have another 35 to 45 years ahead so has to be equities and property to provide the income.
Property Equity - 62%
Pension - 21%
ISA S&S -12.6%
Single stocks (company shares) - 0.3%
Cash 12.6%
Tangable Assets (Cars) 3.7%
property includes rentals/commercial as well as home. We have stopped working this year.
for the OP We have almost all of the pension/iSA in equities. Bonds have been poor on both sides of the scales recently ie they havnt protected the funds in a down turn and as another poster has said we hopefully have another 35 to 45 years ahead so has to be equities and property to provide the income.
Edited by superlightr on Friday 14th July 08:22
Edited by superlightr on Friday 14th July 08:23
superlightr said:
... Bonds have been poor on both sides of the scales recently ie they haven't protected the funds in a down turn ...
Hardly a surprise.
Did your advisor not understand the inverse bond relationship, between prevailing interest rates and bond prices ?
A lengthy period of record 300 year low interest rates, must give eventually.
No one knew when though, but the certainty was interest rates would rise (BoE base rate very long-term average is about 5%).
Rates rise, bond buyers won't pay the same price for the lower coupon, so bond prices fall.
It obviously works the opposite way round as well.
Perhaps after 10 years of unprecedented low interest rates, some people believed such levels were normal.
A nasty shock for anyone who has overborrowed.
Interest payments at 5%, are of course 5 times as much as the payments at 1%.
A few might have thought, 1% to 5% is just a 4% increase and therefore nothing much to worry about.
just about to turn 53
Equities - ISA, GIA and some VCTs - 47.18%
Cash - PBs and index linked certificates - 12.59%
DB pensions based on 20 x multiplier - 28.01%
DC pension and pension commencement lump sums for the DB pensions - 12.22%
I've excluded my dwelling and don't have any other property involvement. Essentially arranged so I can stop whenever my boss annoys me.
Equities - ISA, GIA and some VCTs - 47.18%
Cash - PBs and index linked certificates - 12.59%
DB pensions based on 20 x multiplier - 28.01%
DC pension and pension commencement lump sums for the DB pensions - 12.22%
I've excluded my dwelling and don't have any other property involvement. Essentially arranged so I can stop whenever my boss annoys me.
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