Cash vs shares ratios
Discussion
I had a financial adviser come to see me last week. She drew up loads of graphs and charts and basically said I was sitting on too much cash in bank accounts ( as a proportion) and that it needed to be invested in unit trusts or corporate bonds to get a better return for retirement. Anybody know what the suggested 'mid-range' ratio of cash-equities might sensibly be?
I know the ratio may vary depending upon life stage but she is suggesting the following changes for someone with abour 12 years to retirement and a decent final slaary pension scheme waiting:
Cash, currently 90%+ to get down to about 10% ( feels a bit precarious for someone who is basically self employed)
Income/growth stuff currently about 2% to go up to 75-90%
I am always suspicious of recommendations that lead to her getting commission.
Have a look at a website such as Motley Fool www.fool.co.uk for an explanation of asset allocation or the Financial Services Agency's surprisingly useful www.moneymadeclear.fsa.gov.uk.
90% seems a lot if you are self-employed. On the commission point then why don't you ask her how much she's going to get as a one off AND from repeat annual commissions each subsequent year. Funny how IFA's only recommend Unit Trusts that pay commission rather than Investment Trusts that don't. If you have the time then it's better to at least understand the basics about asset allocation so that you can see if what you're told stacks up.
All the theories about asset allocation are fine, but if you aren't comfortable with the risks you are taking then it's not much use to you.
90% seems a lot if you are self-employed. On the commission point then why don't you ask her how much she's going to get as a one off AND from repeat annual commissions each subsequent year. Funny how IFA's only recommend Unit Trusts that pay commission rather than Investment Trusts that don't. If you have the time then it's better to at least understand the basics about asset allocation so that you can see if what you're told stacks up.
All the theories about asset allocation are fine, but if you aren't comfortable with the risks you are taking then it's not much use to you.
trunnie said:
Have a look at a website such as Motley Fool www.fool.co.uk for an explanation of asset allocation or the Financial Services Agency's surprisingly useful www.moneymadeclear.fsa.gov.uk.
90% seems a lot if you are self-employed. On the commission point then why don't you ask her how much she's going to get as a one off AND from repeat annual commissions each subsequent year. Funny how IFA's only recommend Unit Trusts that pay commission rather than Investment Trusts that don't. If you have the time then it's better to at least understand the basics about asset allocation so that you can see if what you're told stacks up.
All the theories about asset allocation are fine, but if you aren't comfortable with the risks you are taking then it's not much use to you.
Good sites, many thanks.90% seems a lot if you are self-employed. On the commission point then why don't you ask her how much she's going to get as a one off AND from repeat annual commissions each subsequent year. Funny how IFA's only recommend Unit Trusts that pay commission rather than Investment Trusts that don't. If you have the time then it's better to at least understand the basics about asset allocation so that you can see if what you're told stacks up.
All the theories about asset allocation are fine, but if you aren't comfortable with the risks you are taking then it's not much use to you.
She had suggested the Newton Higher Income as a compromise because my wife is risk adverse (which is why we have such a high ratio in cash) and this had been fairly consistent but not overly risky. She left a leaflet showing decent growth rate but when I went online and got the latest leaflet it wasn't as rosey (although still out peforming the sector).
I think the first port of call may be some money from my company into my pension fund.
GB, did you pay her? Was she charging an hourly fee?
If not she is basically acting as a financial sales person, working on commission, rather than advising you what's in your best interest.
Moneyweek.com has a list of IFA who are fee charging.
Persoanlly, I'd book an appointment with one of them.
Oh and FWIW, given cash is yielding upto 7% right now, I don't see anything wrong at all in being 90% cash.
If not she is basically acting as a financial sales person, working on commission, rather than advising you what's in your best interest.
Moneyweek.com has a list of IFA who are fee charging.
Persoanlly, I'd book an appointment with one of them.
Oh and FWIW, given cash is yielding upto 7% right now, I don't see anything wrong at all in being 90% cash.
haworthlloyd1 said:
to get a good rate with cash you need to tie it up for a year and then pay either 20% of 40% tax on it so even if you do find 7% it is likely to be more like 4.2% after tax and I personally think inflation is higher than 4.2%. I know this opens the argument up to debate,
I agree....can't disagree really because those are facts....to an extent though. As one economist put it the current markets are at a stage where people begin to worry more about the return of their cash, than the return on their cash.
To me it's just not the time to be heavily invested. Well not in equities or property in the UK/US.
Over the long term a decent portfolio of dividend yiedling stocks will beat cash and property hands down. But timing is important.
Like you I'm quite adventurous, but I'm also after good value.
Depends what the OP is after.....I still reckon he needs to see a fee charging IFA to get any decent advice though.
haworthlloyd1 said:
also how has your 2% of "income/growth stuff" you DO have performed, are you happy with them, does it worry you having money in this area?
why haven't you had more money in bonds/equities prior to seeing the adviser?
Oh Yes, but is in China based unit trusts, which I think they regard as 'aggressive'. I would never gamble with what I can't afford to lose.why haven't you had more money in bonds/equities prior to seeing the adviser?
I suppose I have to convince myself that the equity markets are not going top fall flat with 80% of my money in them but history should tell me that long term they are a safe bet and if they fell that much we would all be in deep doo-doo.
On way to look at share ownership is that it is insurance against the economy running away without you. If you own bits of the companies that service the expansion, then you get caried along with it.
It is a rare 20 year period when stocks have not done better than cash, but as you come in to shorter periods, it gets to be a bit more shaky.
It is a rare 20 year period when stocks have not done better than cash, but as you come in to shorter periods, it gets to be a bit more shaky.
shadowninja said:
srebbe64 said:
Have lots of eggs in lots of baskets.
I was about to reply with the same advice. Some safe (in fur-lined safes), some medium risk (in egg carton on table), some high risk (balancing on the bonnet of a V8-engined car).Gordon Brown said:
Sadly over the years car engines have had more than their fair share of my wealth.
It is, and always will be, a difficult choice between living for now, and living for later. No-one can tell you where the balance lies, but it is likely noy down the road of borrowing too much today for a car.Hard to deny the urge, though.
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