Diversified portfolios are dead
Discussion
Having recently retired I don’t want to be taking too much risk with my investment portfolio but at a bit of a loss what to do. We have a mix of pension, property, shares, bonds and fixed interest deposits but the latter two are now paying next to no return. I thought when deposit interest rates dropped to 2% fixed interest savings that they could hardly get lower but they have. Not sure it is worth tying up money with the rates being offered. Feel almost compelled to take risk.
Esceptico said:
bonds and fixed interest deposits but the latter two are now paying next to no return.
Did you notice how the US Treasury printed $2.1trn of new M2 circulation and then promptly stopped publishing the M2 figures?I would highly suggest that if your bonds aren't inflation linked, then you're going to want to exit that.
Perhaps a reallocation into assets that present an inflation hedge.
Esceptico said:
Having recently retired I don’t want to be taking too much risk with my investment portfolio but at a bit of a loss what to do. We have a mix of pension, property, shares, bonds and fixed interest deposits but the latter two are now paying next to no return. I thought when deposit interest rates dropped to 2% fixed interest savings that they could hardly get lower but they have. Not sure it is worth tying up money with the rates being offered. Feel almost compelled to take risk.
You are paying the price for people biting off more than they can chew I’m afraid. ZIRP and forbearance have created an environment where failure is not allowed (govts included) and in turn, false markets are created. Of course, when the music stops, the rubbish will be flushed out. Meanwhile, the reality is you have to risk your capital and play at the casino to keep up with inflation. The day of reckoning will arrive, when you’ll be glad of some cash and liquidity as forced sellers enter the market to pay the bills. If anything, with such volatility and extreme valuations, I’d be inclined to increase cash reserves. Not investment advice yada yada, but perhaps some gold stocks, profitable companies before covid and at a lower than present gold price.
Lots mine copper/silver etc as a by product and these commodities are up too. Quite a few miners share prices are down to pre covid levels which is one thing but also some pay ok/good dividends.
Seems less downside (I believe there is upside but just being conservative) to me than some sectors, they are unloved and possibly run counter to your other stuff which could help balance things out?
Lots mine copper/silver etc as a by product and these commodities are up too. Quite a few miners share prices are down to pre covid levels which is one thing but also some pay ok/good dividends.
Seems less downside (I believe there is upside but just being conservative) to me than some sectors, they are unloved and possibly run counter to your other stuff which could help balance things out?
Esceptico said:
Having recently retired I don’t want to be taking too much risk with my investment portfolio but at a bit of a loss what to do. We have a mix of pension, property, shares, bonds and fixed interest deposits but the latter two are now paying next to no return. I thought when deposit interest rates dropped to 2% fixed interest savings that they could hardly get lower but they have. Not sure it is worth tying up money with the rates being offered. Feel almost compelled to take risk.
I would suggest you look at crypto. There's a lot to learn, but it's a glimmer at the end of the tunnel, in terms of FIAT cash and looks still to be in relatively early stages of growth so there's room for more. Watch out for plenty of bs pushing poor coins with no viable use case, so do plenty of research. There are plenty of good youtubers giving useful information.Guybrush said:
Esceptico said:
Having recently retired I don’t want to be taking too much risk with my investment portfolio but at a bit of a loss what to do. We have a mix of pension, property, shares, bonds and fixed interest deposits but the latter two are now paying next to no return. I thought when deposit interest rates dropped to 2% fixed interest savings that they could hardly get lower but they have. Not sure it is worth tying up money with the rates being offered. Feel almost compelled to take risk.
I would suggest you look at crypto. There's a lot to learn, but it's a glimmer at the end of the tunnel, in terms of FIAT cash and looks still to be in relatively early stages of growth so there's room for more. Watch out for plenty of bs pushing poor coins with no viable use case, so do plenty of research. There are plenty of good youtubers giving useful information.Esceptico said:
Having recently retired I don’t want to be taking too much risk with my investment portfolio but at a bit of a loss what to do. We have a mix of pension, property, shares, bonds and fixed interest deposits but the latter two are now paying next to no return. I thought when deposit interest rates dropped to 2% fixed interest savings that they could hardly get lower but they have. Not sure it is worth tying up money with the rates being offered. Feel almost compelled to take risk.
If your objective is to lower risk, then getting “next to no return” from safe (or safe-ish) assets isn’t a problem. You’d have a portion of your portfolio in risky assets for returns, and then a portion in safer assets to minimise downside (or hoping that bonds zig as stocks zag) no?
(Obviously, this is not advice)
I had a work AVC pension defaulted to government bonds and treasury deposits. It made a loss of -0.5% over 3 years. I looked at the historic trend and it has been like that for 8 years. I switched to global equity and saw some return in the last couple of years.
However, there is a risk that the gains I've made are exposed to future losses. I have to view it that this is for the long term so let it be.
However, there is a risk that the gains I've made are exposed to future losses. I have to view it that this is for the long term so let it be.
Mazinbrum said:
This might be useful -
https://www.youtube.com/watch?v=zRSsWG3lNUo
I didn't watch the whole video, but that is pretty much what I do, except I keep closer to 3 years cash. https://www.youtube.com/watch?v=zRSsWG3lNUo
This system is known as "Total Investment"
I am well diversified with the exception of Japan, I've averaged just over 9% over the last ten years.
I set my original drawdown rate at 3.5%, it is currently closer to 2.5% due to excellent recent performance.
Looks like I'm due a pay increase
That video is really worth watching, maybe twice!!
Mazinbrum said:
This might be useful -
https://www.youtube.com/watch?v=zRSsWG3lNUo
Thank you, that was useful. It confirms my thought process. I was thinking, what am I missing here. This is what I was proposing to do while all the large funds have a five/ten year de-risking portfolio balance.https://www.youtube.com/watch?v=zRSsWG3lNUo
Looks to me (as a layman) we've crossed the rubicon in terms of adopting MMT and the West is fully committed now, meaning the threat to your saved capital is likely to change from one of equity market crashes to inflation and a prolonged period of companies finding it hard to continue earnings growth which will lead to stagnation or slow deflation of equity markets unless they're continually pumped with printed money.
Investing is about making sure today's money is worth more tomorrow, inflation kicks that right in the nuts.
So I'd still be diversifying but do it by holding commodities, inflation linked assets and small cap equities.
Investing is about making sure today's money is worth more tomorrow, inflation kicks that right in the nuts.
So I'd still be diversifying but do it by holding commodities, inflation linked assets and small cap equities.
BobsPigeon said:
Investing is about making sure today's money is worth more tomorrow, inflation kicks that right in the nuts.
So I'd still be diversifying but do it by holding commodities, inflation linked assets and small cap equities.
While we all think economists are full of sanctimonious crap, those in the World Bank have the advantage of knowing where the money is going.So I'd still be diversifying but do it by holding commodities, inflation linked assets and small cap equities.
i.e. who they are funding, who needs it, who doesn't. So Guyana and Sudan are forecast to have the best growth. Not really much help as the only way from "in the toilet" is up. The WB growth estimate for Europe for 2021 is 5% (that's very good). I can already see this in my YTD results, my European Fund is up 9%, with US funds up about 5.
That doesn't mean throw everything at Europe, it means adjust your diversifications to capture a little extra gain.
Another good performer this year is my US Quant small & mid cap fund up 14%,ytd, alas, I didn't commit too much to it. So not much overall impact.
We retired early at 54. That was 16-years ago and every year we have produced a surplus of income over expenditure. Covid has magnified this by removing opportunities to spend. Its all too easy to have too much cash. Property is attractive, but with it comes poor liquidity, tenants and repairs.
We have disposed of all our single shares, unit trusts etc as the paperwork was burdensome. Everything went into Vanguard Lifestrategy 80% where savings now go. One consolidated tax certificate and an easy way to understand what its worth at any given time, plus relatively easy access on a rainy day.
Its worth remembering the the FTSE All-share Index currently yields 3.4%. IMHO this means that tying-up significant sums in longterm deposits serves no real purpose, these days. The biggest risk is inflation. If you want to frighten yourself, look at the cost of long-term care in a nursing home that you would actually want to live in and then inflate that by, say 5% per annum for 25-years.
We have disposed of all our single shares, unit trusts etc as the paperwork was burdensome. Everything went into Vanguard Lifestrategy 80% where savings now go. One consolidated tax certificate and an easy way to understand what its worth at any given time, plus relatively easy access on a rainy day.
Its worth remembering the the FTSE All-share Index currently yields 3.4%. IMHO this means that tying-up significant sums in longterm deposits serves no real purpose, these days. The biggest risk is inflation. If you want to frighten yourself, look at the cost of long-term care in a nursing home that you would actually want to live in and then inflate that by, say 5% per annum for 25-years.
rdjohn said:
f you want to frighten yourself, look at the cost of long-term care in a nursing home that you would actually want to live in and then inflate that by, say 5% per annum for 25-years.
You could do that, but in reality very few people go into care or nursing homes and last time I looked the average stay was 2yrs.Guybrush said:
Esceptico said:
Having recently retired I don’t want to be taking too much risk with my investment portfolio but at a bit of a loss what to do. We have a mix of pension, property, shares, bonds and fixed interest deposits but the latter two are now paying next to no return. I thought when deposit interest rates dropped to 2% fixed interest savings that they could hardly get lower but they have. Not sure it is worth tying up money with the rates being offered. Feel almost compelled to take risk.
I would suggest you look at crypto. There's a lot to learn, but it's a glimmer at the end of the tunnel, in terms of FIAT cash and looks still to be in relatively early stages of growth so there's room for more. Watch out for plenty of bs pushing poor coins with no viable use case, so do plenty of research. There are plenty of good youtubers giving useful information.That is very very bad advice.
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