S&P500 at record highs - time to stay in or pull out?
Discussion
Chicken Chaser said:
I've been playing with £500 in Trading 212 the past couple of weeks, with the intention of drip feeding monthly into this over the next 10 years. I've got some in VWRP and some in VUAG (the plan was just to stick it in VWRP but I mistook the Vanguard S&P when adding in some more so Ive probably done the opposite of diversify.
I've got £20k in a NatWest S&S balanced fund which is 57% Equities, 42% Bonds and less than 1% cash. I'm wondering whether to leave it in as a safety net with the bonds or whether to just transfer it all across for equities in T212. Dropping a lump sum into market right now does feel like I'm falling into a trap rather than just relying on the cost averaging by putting some in each month.
How old are you?I've got £20k in a NatWest S&S balanced fund which is 57% Equities, 42% Bonds and less than 1% cash. I'm wondering whether to leave it in as a safety net with the bonds or whether to just transfer it all across for equities in T212. Dropping a lump sum into market right now does feel like I'm falling into a trap rather than just relying on the cost averaging by putting some in each month.
57% equities is quite low but depends how old you are.
I’m about to hit 40 and am still 100% equities.
Chicken Chaser said:
I've been playing with £500 in Trading 212 the past couple of weeks, with the intention of drip feeding monthly into this over the next 10 years. I've got some in VWRP and some in VUAG (the plan was just to stick it in VWRP but I mistook the Vanguard S&P when adding in some more so Ive probably done the opposite of diversify.
I've got £20k in a NatWest S&S balanced fund which is 57% Equities, 42% Bonds and less than 1% cash. I'm wondering whether to leave it in as a safety net with the bonds or whether to just transfer it all across for equities in T212. Dropping a lump sum into market right now does feel like I'm falling into a trap rather than just relying on the cost averaging by putting some in each month.
I think people often confuse diversification with just owning more than one fund. Holding VWRP and VUAG is actually just increasing your exposure to the big US companies because they already make up a huge chunk of VWRP anyway.I've got £20k in a NatWest S&S balanced fund which is 57% Equities, 42% Bonds and less than 1% cash. I'm wondering whether to leave it in as a safety net with the bonds or whether to just transfer it all across for equities in T212. Dropping a lump sum into market right now does feel like I'm falling into a trap rather than just relying on the cost averaging by putting some in each month.
As for the “time in the market beats timing the market” thing, I broadly agree with it over long periods. The hard bit is everyone says it confidently until they watch £20k turn into £15k six months later 😆
Historically lump sum investing usually comes out ahead because markets generally trend upwards over time, but investing is as much psychology as it is maths. If dripping it in over 6 or 12 months helps you stay comfortable and stops you second guessing everything every time the market drops then that has value too.
Personally I only really see bonds as something worth considering when getting closer to retirement or actually needing access to the money. Even then I think I’d rather just build a decent cash buffer so if there’s a market dip when I want to withdraw I can ride it out rather than selling investments at the worst time.
If your horizon genuinely is 10+ years then 42% bonds feels pretty defensive to me, but everyone’s tolerance for seeing red numbers on a screen is different.
Either way you’re already ahead of most people by investing consistently and thinking long term rather than trying to chase headlines or time the next crash.
There’s an argument that even at retirement it may not be wise to be too defensive.
At 60 for a couple there is a very high chance that at least one of you will reach 90. Going bond heavy at 60 pretty much guarantees that your total assets will be eroded by inflation, while you still actually have plenty of time to weather the stock market and therefore gain from higher returns
Also worth considering that if younger lucky enough to have a DB pension then you should consider this (and the state pension as well really) in effect to be an index linked bond when working out your overall asset allocation.
In that case even putting some of your investment account into bonds would be extremely conservative.
At 60 for a couple there is a very high chance that at least one of you will reach 90. Going bond heavy at 60 pretty much guarantees that your total assets will be eroded by inflation, while you still actually have plenty of time to weather the stock market and therefore gain from higher returns
Also worth considering that if younger lucky enough to have a DB pension then you should consider this (and the state pension as well really) in effect to be an index linked bond when working out your overall asset allocation.
In that case even putting some of your investment account into bonds would be extremely conservative.
Inlineonline said:
There s an argument that even at retirement it may not be wise to be too defensive.
At 60 for a couple there is a very high chance that at least one of you will reach 90. Going bond heavy at 60 pretty much guarantees that your total assets will be eroded by inflation, while you still actually have plenty of time to weather the stock market and therefore gain from higher returns
Also worth considering that if younger lucky enough to have a DB pension then you should consider this (and the state pension as well really) in effect to be an index linked bond when working out your overall asset allocation.
In that case even putting some of your investment account into bonds would be extremely conservative.
Indeed - we both have DB pensions and I have a SIPP. Have been invested in a medium risk fund with the aim of growth, I have taken all my tax free lump sums along with some of the profit seen over the last 12 months and once I get my state pension in 6 months time, then will just leave it there to accumulate- less a percentage in cash as a “just in case” buffer.At 60 for a couple there is a very high chance that at least one of you will reach 90. Going bond heavy at 60 pretty much guarantees that your total assets will be eroded by inflation, while you still actually have plenty of time to weather the stock market and therefore gain from higher returns
Also worth considering that if younger lucky enough to have a DB pension then you should consider this (and the state pension as well really) in effect to be an index linked bond when working out your overall asset allocation.
In that case even putting some of your investment account into bonds would be extremely conservative.
Inlineonline said:
There s an argument that even at retirement it may not be wise to be too defensive.
At 60 for a couple there is a very high chance that at least one of you will reach 90. Going bond heavy at 60 pretty much guarantees that your total assets will be eroded by inflation, while you still actually have plenty of time to weather the stock market and therefore gain from higher returns
The role of bonds isn't just about return on investment, it's about reducing volatility in an equity portfolio. When you are young and accumulating and/or up to 10-15+ yrs from retirement you can pretty much ignore volatility and afford to be 'risk on', but the majority of new retirees wouldn't be able to weather a substantial market crash at the start or close to retirement. At all stages in one's investing timeline it should be about getting the balance right between risky assets and non-risky assets. At 60 for a couple there is a very high chance that at least one of you will reach 90. Going bond heavy at 60 pretty much guarantees that your total assets will be eroded by inflation, while you still actually have plenty of time to weather the stock market and therefore gain from higher returns
Phooey said:
Inlineonline said:
There s an argument that even at retirement it may not be wise to be too defensive.
At 60 for a couple there is a very high chance that at least one of you will reach 90. Going bond heavy at 60 pretty much guarantees that your total assets will be eroded by inflation, while you still actually have plenty of time to weather the stock market and therefore gain from higher returns
The role of bonds isn't just about return on investment, it's about reducing volatility in an equity portfolio. When you are young and accumulating and/or up to 10-15+ yrs from retirement you can pretty much ignore volatility and afford to be 'risk on', but the majority of new retirees wouldn't be able to weather a substantial market crash at the start or close to retirement. At all stages in one's investing timeline it should be about getting the balance right between risky assets and non-risky assets. At 60 for a couple there is a very high chance that at least one of you will reach 90. Going bond heavy at 60 pretty much guarantees that your total assets will be eroded by inflation, while you still actually have plenty of time to weather the stock market and therefore gain from higher returns
Yes the point is that at an early stage of retirement where your (say) 4% drawdown is a small proportion of your total assets, you are well able to weather even quite large temporary downturns in the market.
By going heavy into bonds this early you are potentially giving up 3-4% additional returns from equities over bonds which could be very valuable to the retirement plan.
By going heavy into bonds this early you are potentially giving up 3-4% additional returns from equities over bonds which could be very valuable to the retirement plan.
Inlineonline said:
Yes the point is that at an early stage of retirement where your (say) 4% drawdown is a small proportion of your total assets, you are well able to weather even quite large temporary downturns in the market.
By going heavy into bonds this early you are potentially giving up 3-4% additional returns from equities over bonds which could be very valuable to the retirement plan.
Easy to say if you have a separate guaranteed income streamBy going heavy into bonds this early you are potentially giving up 3-4% additional returns from equities over bonds which could be very valuable to the retirement plan.
Peace of mind is an important part of the process.
'Bond heavy' is a little vague.....
IMHO once you're into drawdown (and I am), you really need 1-2 years of spending in cash type stuff (MM funds etc) and another 2-3 years in low volatility stuff. The rest can be in equities.
If you're all in with equities, then you can't help but panic in a downturn, but if you know you're completely safe for 2 years and relatively safe for another 2, then you can be a bit more rational and hopefully things have recovered before you need to sell. Some people want to feel safer for longer and that requires a lower equity component. There's no universally correct formula & 'bond heavy' isn't wrong if it suits your risk appetite.
IMHO once you're into drawdown (and I am), you really need 1-2 years of spending in cash type stuff (MM funds etc) and another 2-3 years in low volatility stuff. The rest can be in equities.
If you're all in with equities, then you can't help but panic in a downturn, but if you know you're completely safe for 2 years and relatively safe for another 2, then you can be a bit more rational and hopefully things have recovered before you need to sell. Some people want to feel safer for longer and that requires a lower equity component. There's no universally correct formula & 'bond heavy' isn't wrong if it suits your risk appetite.
Nicetobenice said:
Inlineonline said:
Yes the point is that at an early stage of retirement where your (say) 4% drawdown is a small proportion of your total assets, you are well able to weather even quite large temporary downturns in the market.
By going heavy into bonds this early you are potentially giving up 3-4% additional returns from equities over bonds which could be very valuable to the retirement plan.
Easy to say if you have a separate guaranteed income streamBy going heavy into bonds this early you are potentially giving up 3-4% additional returns from equities over bonds which could be very valuable to the retirement plan.
Peace of mind is an important part of the process.
It's always a balance between the spreadsheet and the stomach.
With me the spreadsheet says one thing the stomach says another so I'm not 100% equities.
For me that's the right decision.
It's always telling when IFAs on here comment that if 100 people walk in very few walk out with a recommendation to go 100% equities.
It's simply not where most peoples appetite for risk is.
With me the spreadsheet says one thing the stomach says another so I'm not 100% equities.
For me that's the right decision.
It's always telling when IFAs on here comment that if 100 people walk in very few walk out with a recommendation to go 100% equities.
It's simply not where most peoples appetite for risk is.
Last few posts all make good and fair points in that there is no right or wrong answer , everyone has their own / different risk ability and therefore comfort factor , age bearing , other investments , income needed and overall pot size.
Of our “ investable “ wealth this would be in circa 8 pots per se ranging from the main private pension pot ( 47% ) to the EIS / VCT / AIM pot at 3%.
Across the total , Bonds ( all in Funds ) are currently around 10%.
These in themselves provide a modest hedge against Equity performing poorly.
I stopped work at 60 which is getting on for 5 years ago and the above hasn’t materially changed.
Of our “ investable “ wealth this would be in circa 8 pots per se ranging from the main private pension pot ( 47% ) to the EIS / VCT / AIM pot at 3%.
Across the total , Bonds ( all in Funds ) are currently around 10%.
These in themselves provide a modest hedge against Equity performing poorly.
I stopped work at 60 which is getting on for 5 years ago and the above hasn’t materially changed.
PeteTaylor99 said:
It's a mind set and the point being that if you're risk averse(overly) you're in Bonds in your 30s, 40's and 50s when you should be avoiding them to get the growth whilst you're young. It's one thing to make that shift later on but at the start?
The poster was referring to the early stages of retirement.It's very easy to say "stay in equities" when you can rely on a DB pension.
Lots of good points.
To have the confidence to weather the storm, stay with a high proportion of your assets in equities and thereby likely benefit in the long term require confidence.
This can come from knowledge and learning, having separate streams of income (the best being a DB pension of course), personality, previous experience etc.
It's one regressive aspect of investing, people who are wealthy enough that even if their assets collapsed (hopefully temporarily)by 40-50% they coudl carry on their lives unaffected can easily remain invested and benefit in the long term, while those with less may not feel as confident (rightly so).
And I totally agree that being able to sleep at night is overwhelmingly the most important thing, better to be a bit poorer and settled, than potentially richer but constantly stressed.
To have the confidence to weather the storm, stay with a high proportion of your assets in equities and thereby likely benefit in the long term require confidence.
This can come from knowledge and learning, having separate streams of income (the best being a DB pension of course), personality, previous experience etc.
It's one regressive aspect of investing, people who are wealthy enough that even if their assets collapsed (hopefully temporarily)by 40-50% they coudl carry on their lives unaffected can easily remain invested and benefit in the long term, while those with less may not feel as confident (rightly so).
And I totally agree that being able to sleep at night is overwhelmingly the most important thing, better to be a bit poorer and settled, than potentially richer but constantly stressed.
alscar said:
Last few posts all make good and fair points in that there is no right or wrong answer , everyone has their own / different risk ability and therefore comfort factor , age bearing , other investments , income needed and overall pot size
Your point is well made. For many investors it's no help to know that "markets have always recovered although it might take a decade" or that "average UK life expectancy is age 85".If you were age 70 with 100% equity portfolio and got a serious cancer diagnosis right on top of a stock market slump you could be in deep trouble.
Inlineonline said:
Lots of good points.
To have the confidence to weather the storm, stay with a high proportion of your assets in equities and thereby likely benefit in the long term require confidence.
This can come from knowledge and learning, having separate streams of income (the best being a DB pension of course), personality, previous experience etc.
It's one regressive aspect of investing, people who are wealthy enough that even if their assets collapsed (hopefully temporarily)by 40-50% they coudl carry on their lives unaffected can easily remain invested and benefit in the long term, while those with less may not feel as confident (rightly so).
And I totally agree that being able to sleep at night is overwhelmingly the most important thing, better to be a bit poorer and settled, than potentially richer but constantly stressed.
Just on the DB pension , I gave mine up and transferred to “ private control “ when I was offered a 40.7 multiplier of the annual. To have the confidence to weather the storm, stay with a high proportion of your assets in equities and thereby likely benefit in the long term require confidence.
This can come from knowledge and learning, having separate streams of income (the best being a DB pension of course), personality, previous experience etc.
It's one regressive aspect of investing, people who are wealthy enough that even if their assets collapsed (hopefully temporarily)by 40-50% they coudl carry on their lives unaffected can easily remain invested and benefit in the long term, while those with less may not feel as confident (rightly so).
And I totally agree that being able to sleep at night is overwhelmingly the most important thing, better to be a bit poorer and settled, than potentially richer but constantly stressed.
I was also thinking of my wife who would have only received 50% of my DB annual if I died and wouldn’t keep her in the style she has become accustomed to
I can honestly say the thought of ( at the time ) no IHT being due on the transferred pot when we both died was ever a consideration but Rachel kindly then thought that would be a cracking idea.
alscar said:
Inlineonline said:
Lots of good points.
To have the confidence to weather the storm, stay with a high proportion of your assets in equities and thereby likely benefit in the long term require confidence.
This can come from knowledge and learning, having separate streams of income (the best being a DB pension of course), personality, previous experience etc.
It's one regressive aspect of investing, people who are wealthy enough that even if their assets collapsed (hopefully temporarily)by 40-50% they coudl carry on their lives unaffected can easily remain invested and benefit in the long term, while those with less may not feel as confident (rightly so).
And I totally agree that being able to sleep at night is overwhelmingly the most important thing, better to be a bit poorer and settled, than potentially richer but constantly stressed.
Just on the DB pension , I gave mine up and transferred to private control when I was offered a 40.7 multiplier of the annual. To have the confidence to weather the storm, stay with a high proportion of your assets in equities and thereby likely benefit in the long term require confidence.
This can come from knowledge and learning, having separate streams of income (the best being a DB pension of course), personality, previous experience etc.
It's one regressive aspect of investing, people who are wealthy enough that even if their assets collapsed (hopefully temporarily)by 40-50% they coudl carry on their lives unaffected can easily remain invested and benefit in the long term, while those with less may not feel as confident (rightly so).
And I totally agree that being able to sleep at night is overwhelmingly the most important thing, better to be a bit poorer and settled, than potentially richer but constantly stressed.
I was also thinking of my wife who would have only received 50% of my DB annual if I died and wouldn t keep her in the style she has become accustomed to
I can honestly say the thought of ( at the time ) no IHT being due on the transferred pot when we both died was ever a consideration but Rachel kindly then thought that would be a cracking idea.
That seems very generous.
Inlineonline said:
That does seem a good deal, they offered you 40* the annual gross figure taking into account any lump sum? Which DB scheme was it if you don't mind saying?
That seems very generous.
Timing helped. That seems very generous.
March 2020.
Pricing of gilts too.
Probably only around 25 multiplier now.
Private Financial sector.
Gassing Station | Finance | Top of Page | What's New | My Stuff