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bond/equity allocation
matthx
Posted: 18 June 2017 15:21:46(UTC)
#1

Joined: 18/06/2017(UTC)
Posts: 1

Hi all,

New to the forum, just looking for a bit of advice regarding a portfolio I'm closing to pushing the button on.

I've around £85,000 to invest with a 20-25 year horizon. The investment will be within an ISA.

I've tried to keep things as simple as possible and have limited myself to two funds.

The allocation is as follows.

70% in Vanguard LifeStrategy 100% Equity Fund
30% in Vanguard UK Government Bond Index

I intend to contribute to both of these monthly in the same allocation as above.

I was wondering whether it would be worth looking at corporate bond fund too?

Any thoughts most welcome!
Law Man
Posted: 20 June 2017 15:33:08(UTC)
#2

Joined: 29/04/2014(UTC)
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Matthx- I assume you have covered your basic self analysis e.g. attitude to risk; and are investing through a tax efficient ISA or SIPP.

It seems you have a long investment period and can leave the money untouched.

The world equity index tracker is a good choice. Consider VWRL.

Why do you want bonds? The usual reason is to add a stabiliser. However, bond rates are very low. As such you could lose capital. Over 20 years + you can ride out market falls; particularly as you put money in over a period.

If you want to diversify from basic equities, consider REITs, infrastructure, private equity ITs and wealth preservation funds such as PNL and CGT. If you want bonds, investment grade corporate bonds will yield more than government bonds e.g. SLXX.
1 user thanked Law Man for this post.
mohan on 20/06/2017(UTC)
David 111
Posted: 20 June 2017 15:52:52(UTC)
#3

Joined: 09/07/2010(UTC)
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Bonds are not (in my opinion, for what it's worth) the place to be right now as Lawman says. However if your strategy it to maintain your 70/30 split through regular rebalancing, then it could make sense to have some bonds. However, without a rebalancing strategy I can't see much point.
King Lodos
Posted: 20 June 2017 18:28:50(UTC)
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Joined: 05/01/2016(UTC)
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Why not just a Vanguard Lifestrategy 60 or 80 fund, with the 40 or 20% allocation to global bonds, and automatically rebalanced for you?

I think bonds should always be a part of a portfolio .. When value flows out of stocks, it usually finds its way into bonds – which achieves the main purpose of diversification: limiting big losses and ensuring you've always got purchasing power.

The good thing with a Lifestrategy 60 or 80 is you'd get corporate and inflation-linked bonds too – and if inflation-linked bonds turned out to be the place to be, your allocation to them would likely grow in line with the market's allocation .. It's a smart way to invest .. And the UK Lifestrategy funds ensure a sensible allocation to Sterling.

Statistically, US stocks and gov bonds are both poised for real returns between 0 and -2% over the next 10 years (just based on valuations) .. Foreign stocks and bonds (particularly Emerging Mkts) may be poised for higher returns, but also higher risk – which means greater uncertainty.

As I mentioned in the other thread, as a buy-and-hold portfolio, I'd probably have at least 5% in gold and 5% in cash too, just to add a little extra diversification .. In the stagflationary 70s, stocks and bonds produced negative real returns, while only gold and commodities were positive .. You could consider 5% in the SPDR Gold ETF, and 5% in a broad Commodities ETF .. You could add some Small-Cap and Value stocks exposure.

This is a useful tool to try out asset allocations – but I think Lifestrategy is a smart core holding (even if it has a rough 10-15 years .. chances are everything else will too):

https://www.portfoliovisualizer.com/backtest-asset-class-allocation
Pensioner
Posted: 20 June 2017 22:31:56(UTC)
#5

Joined: 13/12/2010(UTC)
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Keep it simple with the uncertainty of the Brexit outcome which may take years. Put your money into ISA's with FRCL and Fundsmith. Both are doing extremely well just now. FRCL dates back to 1868 and pays 4 divis a year (and rising). The share price as just hit 600p. Its a GLOBAL fund over 500 companies in 30+ countries. Fundsmith also a GLOBAL fund with 30 companies. ALL WINNERS . The class "T" direct up 349p today and the class I 351.99p . Fundsmith launched Nov. 2010 at £1 per share, at today's price around 350p. Not a bad return in 6.5 years. Just invest. No effort. No mortgage as in buy to let with all the associated tax problems and tenant problems. Don't take my word for it. Do your own research.
1 user thanked Pensioner for this post.
MJPM on 21/06/2017(UTC)
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