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Inoperational Bumblebee

Your asset allocation, and why

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A couple of other threads made me ponder why others choose the exposure they do and the reasoning behind it. Thought people might be interested in sharing.

Mine is intended to be (spoilered for brevity):

Spoiler

10% UK Govt bonds
10% UK Inflation-linked Gilts
10% FTSE100
10% FTSE250
10% S&P500
10% Europe ex-UK
10% Asia Pacific ex-Japan
10% Japan
10% Emerging Markets
5% Gold
5% Bitcoin

When I started in November 2014 I just thought I'd just equally weight everything I was interested in, and swap some gold for bitcoin as I thought it looked promising. Maybe change it in a few years when I knew more about investing. Rebalance with new money and review every two years to give chance for decent gains to occur. I knew I knew less than the market, but I wasn't convinced the market necessarily knew best hence the equal weighting.

I'm up a nominal 13% overall in 2.5 years [EDIT: CAGR 6.7% by tax year] so I'm not doing too badly; it would be higher but a recent influx of cash has meant [EDIT: gains from] recent purchases (or lack thereof) are more heavily weighted.

I'm deliberately overweight the UK in terms of market cap as I like the dividends - all Inc rather than Acc deliberately as I intend to rebalance with new money.

My one dalliance with individual shares left me cold as I missed out on 200% gains. I'm happier with broad market trackers for my sanity.

Being a member of ToS since 2008 has meant I don't trust property as an asset class in the slightest. 'Real' estate, REIT or otherwise. Residential should be for living in, and I think the internet has permanently altered the commercial property landscape and even after twenty years it's still unclear how. I don't know any better so I'm avoiding any exposure other than the house we live in.

Edited by Inoperational Bumblebee

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Mine will look quite naive in comparison. 

18% - the house I live in. 

60% - the pension. No idea of the breakdown. I should find out. I like it because it's low hassle, the charges are fairly low, and the growth has been 9+%/annum in the last few years. This is where the bulk of my regular savings go too. 

Leaving 22% - 10% of that in cash ISA, 70% in P2P, 3% roboinvesting service. 17% NS&I. 

NS&I because it tracks inflation. Cash in case of emergency. For P2P most of it is in Abundance and community energy projects as I like:

Investing in things that make a positive difference. Especially in my local area.
Repayment is generally a mix of capital & interest - freeing up money to invest elsewhere.
So far the (Abundance) platform and people seem really solid and it has an IFISA

I thought I'd try out the roboinvesting service as the sign up bonus is quite generous, its instant access if you want to get your money out,  almost no fees under a certain amount and I figure it wouldn't do any harm to be more diversified (and take advantage of the relevant tax allowance). Similarly, I joined ratesetter because the sign up bonus was generous. I now use it for temporarily holding  money which might otherwise stay in the current account. 
 

Edited by SCC

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My understanding is that the main point of following an asset allocation strategy with active rebalancing is to try to get you buying into cheaper assets and selling more expensive assets so that it automates a bit of "buy low, sell high".

I'm 50% in shares,.40% gilts 5% PM's and 5% cash.

So the"risk" trade is the shares. If they have a good run, then I lock in the gain by buying into the other classes.

If shares collapse, then I have the capacity to buy into shares at the low price.

 

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Nothing remotely so sophisticated!

Every year I find myself with a load of cash needing to go somewhere, bung £20k into VCTs for the tax and the dividends and the max into the SIPP with the excess into the ISA followed by some frantic research to find what I think is the current cheapest equity market and then buy and hold for the long term.

I used to be really into managing my portfolio but may soon even be shoving loads into managed funds as I'm beginning to find myself recklessly punting big sums on share tips just for a bit of excitement.

I've always had a big bias towards equities as any chart comparing interest rates to inflation over time shows that they're a slow but surefire way to lose money unless you're repeatedly in and out of them.

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Don't currently own a house (STR'd in 2014). Excluding Pension:

28% Shares (mix of ISA and direct ownership)

10% Premium Bonds

42% P2P (zopa, Ratesetter, Funding Circle Ratesetter (Oz)

12% Cash income bonds

3% Cash ISA

5% Cash

I STRd in 2014 assuming a purchase in Oz. Now we are back in the UK and I'm going to be A-raped on the investment income from Shares and P2P as its not under ISA cover. Planning to transfer 20K a year into ISAS and also pay at least 10K in AVC's into my pension.

Looks like we will probably buy in next two years so starting to reduce down p2P and stick in Premium Bonds under my wifes name as they are easily accessible and tax free with a view to using that as a deposit.

Edited by Kurt Barlow

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Hah, don't feel my allocation is excellent or anything, it was more that I didn't know what I was doing at the start and it's done well enough not to change it! My thinking was that separating out the equity geographically means I can benefit from volatility. It's always made sense to me that you can take advantage of fluctuating valuations. I like numbers, what can I say. I'm probably wasted doing the job I do tbh!

16 hours ago, SpectrumFX said:

My understanding is that the main point of following an asset allocation strategy with active rebalancing is to try to get you buying into cheaper assets and selling more expensive assets so that it automates a bit of "buy low, sell high".

Absolutely. Separating my exposure out into equal amounts and topping up the lowest each month is how I hope to get the most from that. I knew it would take a few years for the amounts in each to reach a level that monthly fluctuations would exceed the top up amount, but it made sense to me to start as I meant to go on. That way I had a plan I didn't need to deviate from.

I am intrigued by those of you high in P2P; do you feel you're seeing enough return for the risk? My dalliance with Zopa made me uncomfortable with the potential losses. I still made a decent profit, just perhaps seeing that individual tranches of my lending were never likely to come good seemed overly risky to me. Could be a product of how the loan book was presented at the time. I don't know if it's different now tbh.

BTW I haven't included my workplace pension or our (mortgaged) house in mine. The pension because I can't access it until I'm 66 (like fuck am I working until then), and the house, because we are living in it rather than intending to sell it fund retirement.

@Frank Hovis, have you thought about getting your excitement elsewhere? Say 90+% in boring global trackers, and play with the rest in trading shares, currencies or cryptos?
I find a few hundred quid in an FX trading account distracts me enough to stop me trading with my shares at all. Currencies are so volatile that there's always excitement, but keeping the amounts small means any losses are irrelevant to the big picture.

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OK - in terms of investments (really just getting going although my returns 12.3 % annualised since 2009) :

Europe 40 %

S&P 13 %

UK 33%

Japan 7 %

Asia 7%

Including other assets :

Pension 42%

Business 40%

Cash 14 %

Investments (as listed above) 4%

I have been way too cautious previously but now have enough in cash to pay off business mortgage if necessary becoming more ambitious.

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