Author Topic: Deciding on asset allocation - UK  (Read 1877 times)

MostlyBearded

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Deciding on asset allocation - UK
« on: December 21, 2016, 09:54:51 AM »
Hi guys,

My wife and I will shortly be waving goodbye to the last of our non-mortgage debt and so the focus turns to investing. I have read a fair bit on investing and I'm keen to keep things as simple as possible. Choosing the best way to carve up my money pie has me scratching my head so I thought I would see what other UK based investors are doing?

There seem to be a million posts for USA based mustachians but I can't find much for UK

I was thinking of doing a mix of FTSE/World and possibly a small slice of bonds/cash but I can't figure out exactly how I should allocate percentages.

At the moment I am thinking something along the lines of 30% FTSE all share, 60% All World ex-UK, 10% cash/bonds. I am also considering whether I would be better off just tossing everything in a Vanguard Lifestrategy 100, paying slightly more in fees and holding a bit in cash.

Basic stats... I'm 30, wife 33, we have 2 kids and baby on the way. Savings rate once last little bits of debt paid will be about 35% (increasing sharply once she returns to work in a few years). Goal is to FIRE late 40's.

Thanks,

NW
« Last Edit: December 21, 2016, 09:56:48 AM by Nameswhack »

weeblesim

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Re: Deciding on asset allocation - UK
« Reply #1 on: December 21, 2016, 01:22:13 PM »
Hi Nameswhack!

I'm in a similar position to you and have just started investing. I've personally gone for Vanguard Lifestrategy just for ease at the moment, with the idea of diversifying later on if needed. I'm not sure if this is the best strategy though.

Thanks

cerat0n1a

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Re: Deciding on asset allocation - UK
« Reply #2 on: December 21, 2016, 03:44:59 PM »
30% ftse all share is over weight as the uk represents about 6%of world stocks. Same for the life stratergy, it has a big home bias.

Something like 70% of FTSE earnings come from outside the UK - the megacorp oil, mining & banks that just happened to be listed in London see to that. There's also something to be said for a little home bias, assuming the OP is planning to retire in the UK. If the does well against other currencies (don't laugh, it could happen...)  you'd have done better to have a bit of home bias.

Both 30/60/10 or the Lifestrategy seems like sensible options to me. How good is your crystal ball?

MostlyBearded

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Re: Deciding on asset allocation - UK
« Reply #3 on: December 22, 2016, 02:54:48 AM »
Thanks all for your responses.

30% ftse all share is over weight as the uk represents about 6%of world stocks. Same for the life stratergy, it has a big home bias.

There's also something to be said for a little home bias, assuming the OP is planning to retire in the UK. If the does well against other currencies (don't laugh, it could happen...)  you'd have done better to have a bit of home bias.


Quite possibly not, we may have the option to spend the latter halves of our careers abroad and we intend to spend time living in different countries for months at a time in FIRE. If we found somewhere we liked and it was possible to stay for a few years, we may well do that. But really there is no telling where we will end up! It may just as easily be the UK.

Would any of you mind sharing your allocation and rationale?

Thanks

NW

dreams_and_discoveries

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Re: Deciding on asset allocation - UK
« Reply #4 on: December 22, 2016, 05:20:35 AM »
You also have to weight up currency risk, especially as the pound is unstable and historically low at the moment.

I'm 92% stocks, 8%  bonds.

Split 40% US, 35% UK, then a mix of others.

Butterfingers

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Re: Deciding on asset allocation - UK
« Reply #5 on: December 22, 2016, 05:28:04 AM »
My "strategy" barely deserves the name. After getting the best deal from pension contributions, I chuck everything into ISA-wrapped Lifestrategy 100 Acc. My rationale is that a bit of home weighting is no bad thing (though like you we may move overseas later in life), and 100% stocks will likely outperform a stock/bond mix (especially over longer timeframes). Rebalancing is taken care of within the fund, so all I have to do is keep throwing money at it each month there's nothing to balance or think about.

I like index trackers and I'm supremely lazy, so Lifestrategy was basically tailor-made for me.

MostlyBearded

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Re: Deciding on asset allocation - UK
« Reply #6 on: December 22, 2016, 06:38:40 AM »
D&D - Thanks. Yes I considered the health of the pound but since I want an exposure to global markets both short term and long term, I guess waiting to for the pound to rebound is no better than trying to time the equities market!

Butterfingers - The more and more I read about investing vs human emotions, (and knowing how I tend to over-analyse things sometimes!) the more appealing LS100 seems. Maybe worth paying that fraction extra for the peace of mind that I won't be scrutinizing my %'s if the markets go beserk. The idea of being lazy, yet having a well balanced portfolio suits my hopes for a 'set-it-and-forget-it' system!

Playing with Fire UK

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Re: Deciding on asset allocation - UK
« Reply #7 on: December 22, 2016, 04:06:59 PM »
I'm moving towards 100% in a whole world tracker.

If I knew I wanted to retire in the UK I'd be in Lifestrategy. I'd need to hedge against my neighbours in the UK becoming more prosperous and decreasing my spending power.

When I first started I had a massively complex allocation and was checking in with it and getting to an unhealthy place with the frequency that I felt I should add funds to something that had dropped a bit (at least there were no fees to buy!). Now I'm much more at peace with a simpler strategy. I still fuck around with about 10% because I can't quite help myself...yet.

If the OP is getting started I'd highly recommend staying simple. If your rebalancing spreadsheet needs a macro it's gone too far!

mohawkbrah

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Re: Deciding on asset allocation - UK
« Reply #8 on: December 24, 2016, 02:46:16 PM »
mine atm is about 60% USA 20% Uk 20% EU

but i found this fund from fidelity that is global and spreads it all quite well which i may start slowly switching to. more for simplicity sake than anything else so i only have 1 fund to funnel cash into.

https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=I1F0J&univ=O&pageType=portfoliobreakdown