Share this page:
Stay connected:
Welcome to the Citywire Money Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error

5 Year Investment £300k
TJL
Posted: 30 July 2017 14:37:54(UTC)
#23

Joined: 14/03/2011(UTC)
Posts: 431

Thanks: 224 times
Was thanked: 319 time(s) in 168 post(s)
Yes, excellent question Mr J.
I have invested in stakeholder pensions for several years for our two children.
I would have chosen SIPPS and managed them myself, but I thought that if they fail to take any interest over the years, the pensions will run on and on like rudderless ships after I'm gone, or no longer competent.
With stakeholders, at least they have a pension, which will manage itself after a fashion, and they can transfer later (without charges I believe) if they become financially savvy.
King Lodos
Posted: 30 July 2017 15:00:21(UTC)
#19

Joined: 05/01/2016(UTC)
Posts: 1,519

Thanks: 245 times
Was thanked: 1896 time(s) in 792 post(s)
Mr J;49375 wrote:
I have a supplementary question here, which is how do you cater for the problem that self management depends upon the mental capability of the self. I worry that as years roll by there is an increasing risk that I and my family will 'lose my mind' so to speak. A stroke may strike, dementia may come etc or indeed I may just become too out of touch. So how do people see this ?

Try to train your family in investment knowledge and skills ?
Set up some static portfolio on a for ever basis ?
Use a portfolio management service that can be trusted over 30 years plus ?
Create a family trust of some sort ?

I see this as one of the biggest problems families face. In my experience no family head wants to relinquish control even when they really should, and family members seem rarely to have a common interest in managing money for the shared good of the family. At some point someone is going to just sell the family silver for their own greed and stupidity. Must it be rags to rags in three generations ?


I've wondered what the scope is to set an investment portfolio up as a family trust – whether you pass on management duties to a child or nephew, and what the legal status might be.

I think there's likely some cause and effect – the Japanese stay lucid long into old age by keeping active .. Warren Buffett's still managing a large part of the US economy in his 80s .. But he does face the same dilemma of finding people he's willing to pass the reigns to.

I'm currently reading The Power of Habit, by Charles Duhigg .. I think if your investment process is a disciplined annual rebalance, it's quite possible it becomes as much of a habit as walking .. There's a case study of someone who developed severe dementia and memory loss, yet could still walk around the neighbourhood and find their way home easily because it had become a habit, and resided in a much more primitive part of the brain.



2 users thanked King Lodos for this post.
Tim D on 30/07/2017(UTC), Guest on 08/08/2017(UTC)
King Lodos
Posted: 30 July 2017 15:30:45(UTC)
#22

Joined: 05/01/2016(UTC)
Posts: 1,519

Thanks: 245 times
Was thanked: 1896 time(s) in 792 post(s)
David Trigg;49383 wrote:
King Lodos. While I agree with your point re shares being very high at the moment isn't a 60% fall a bit pessimistic - it would make the FTSE100 around 3000?

Also a world tracker will be biased towards the biggest stocks. If one were to go down that route would it not be best to split it equally between Large, Mid and Small cap trackers. But if your 60% prediction is correct they will only track down. The idea of active management is that a good manager will negate some of the downside risk. I recognise that cynics will say, with some degree of accuracy, that a lot of active managers are just highly paid trackers. Grateful for your view.


Well the UK's currently on a CAPE ratio of about 15 .. Developed markets can fall to CAPE ratios around 5, as the US did in 1921, and nearly reached again in the early-80s.

I'd say you should prepare for a maximum drawdown of 66% from here, which would take the FTSE100 to 2456 .. But of course that's just price .. If you factor in any sort of drop in earnings, that could go lower, and for longer .. The Nikkei 225 lost 80% over 20 years, but from much higher valuations.

In theory, adding exposure to Small and Mid-Caps should increase your drawdown risk – as Size is considered a risk-factor .. A recession could see a lot of Small Companies that are being propped up today simply fail – larger cap, quality companies (like Fundsmith, Lindsell Train and Murray Int hold) would likely hold up better in economic turmoil .. But I'd think the risk with them is a sell-off sparked by rising bond yields.

The best way to mitigate risk is diversification .. In the case of Warren Buffett, holding quite a bit of cash is a very simple way to reduce drawdowns and give yourself the option to buy cheap – and means he can have most of his portfolio in just 3 or 4 stocks.

But yeah, I think the industry's just designed to force most active funds to run like trackers .. If you take something like Woodford Equity Income, presumably he couldn't go to 50% cash, or 20% gold, as it would suddenly put him in the mixed asset sector?
3 users thanked King Lodos for this post.
gillyann on 07/08/2017(UTC), Guest on 08/08/2017(UTC), Tim D on 08/08/2017(UTC)
Alan Parker
Posted: 07 August 2017 14:37:23(UTC)
#24

Joined: 10/08/2016(UTC)
Posts: 4

Was thanked: 3 time(s) in 2 post(s)
I like the idea of splitting the 2 Woodford investments in half because they have the same chaps name in the title. Gotta diversify!
GeneralZod
Posted: 07 August 2017 14:51:43(UTC)
#25

Joined: 01/07/2015(UTC)
Posts: 103

Thanks: 8 times
Was thanked: 39 time(s) in 29 post(s)
Why not just stick the lot in Vanguard Life strat 80?
1 user thanked GeneralZod for this post.
Guest on 08/08/2017(UTC)
2 PagesPrevious page12
+ Reply to discussion

Markets

Other markets