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Cash allocation
A M
Posted: 10 October 2017 15:10:21(UTC)
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Joined: 06/10/2017(UTC)
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I have a cash ISA just matured and retaining it in cash is going to pay virtually nothing, as we all know. Even if interest rates are increased soon I can't see that making much difference to Cash ISA returns for a very long time.

I was toying with putting it into equities (Vanguard Global All Cap Fund or a Lifestrategy fund) but wondered what percentage of my holdings to keep in cash / equities / bonds / property.

What proportions do other readers have? I am still working but could retire at any time now - I am doing the "if it gets too bad I'll pack it in".

The last time I checked my allocation was approximately:

50% Equities
20% Bonds
25% Cash
5% Property REITs (Not house or physical property)

I haven't included my home in the above, but it would throw all those allocations out heavily towards physical property if I did include it.


Alan Selwood
Posted: 10 October 2017 16:10:19(UTC)
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Any answer will depend on individual circumstances, attitude to risk, need for cash to fund payments and the time period involved.

If you look at last week's Investor's Chronicle, you can see John Baron's Growth and Income portfolios with the percentages allocated to each (AFTER keeping back sufficient cash to meet short-term and possibly medium-term needs), and this may give you some guidance. Certainly you will need to take into account the fact that most bonds are generally expensive and some equities too. But also you should be aware that having a spread of asset types helps reduce volatility of both income and capital. So after keeping back sufficient cash in the ISA framework to tide you over for a few years, you may want to allocate some sort of spread of equities, bonds, property, etc so as to diversify. The exact proportions you choose will inevitably be impossible to judge correctly until after the event! Hindsight always works better than foresight when making judgments, and it's not easy even then.........!
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uhm on 10/10/2017(UTC), Mike Glancy on 10/10/2017(UTC)
King Lodos
Posted: 10 October 2017 16:49:19(UTC)
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Ideal asset allocation is a tough problem in this environment.

Government bonds have clearly been pushed into bubble-like valuations – with yields around 1%, you should expect to make 1% (if in doubt, buy individual bonds and hold to maturity) .. No one knows what's happening with rates or inflation, but it's difficult to imagine much upside for bonds .. Returns could get eaten up by inflation for many decades, as they did in the 20th century.

But of course government bonds are the yardstick against which we measure everything else – which makes everything else relatively cheap .. so long as rates stay where they are.

So there's one path, where rates continue to rise slower than expected, and stock valuations could still easily double .. and another where inflation surprises, rates rise faster, and the rug's pulled out from under everything. (Some are calling this the 'everything bubble' – but right now I think the only bubble is gov. bonds)

I'm roughly 1/3rd each Stocks, Bonds/Hedge Funds, and Cash ... I use short-duration corporate bonds and junior debt (GAM Star Credit Opps) – avoiding most the bond market, and some P2P lending .. I'm very against losing money, but take more risk in Stocks (mostly Emerging Mkts and Small-Caps) .. It's worked great so far .. I may be too risk-averse .. But in very simple terms, high valuations across everything mean you're looking at 1-5% annual returns across most things, and 50-60% downside – so I wouldn't want to be too all-in in this economic experiment

You could look at portfolios like Hawksmoor Vanbrugh – they've wound up in a similar place to me, and I think they've done a great job of running a conservative portfolio that's held up well

http://www.hawksmoorfm.co.uk/wp-content/uploads/2017/10/20170930-Vanbrugh-Factsheet-September-2017.pdf
5 users thanked King Lodos for this post.
Guest on 10/10/2017(UTC), Guest on 10/10/2017(UTC), Harry Trout on 10/10/2017(UTC), uhm on 10/10/2017(UTC), dlp6666 on 13/11/2017(UTC)
chubby bunny
Posted: 10 October 2017 20:35:06(UTC)
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Hawksmoor Vanbrugh holds almost as many funds as you, Lodo!

Amati UK Smaller Companies
Artemis European Opportunities
Artemis Global Select
Baillie Gifford Japanese Income Growth
Baring Global Resources
Downing Strategic Micro-Cap Trust
Downing UK Micro-Cap Growth
Guinness Asian Equity Income
Hermes Asia ex Japan Equity
HG Capital Trust
ICG Enterprise Trust
India Capital Growth
Jupiter Emerging & Frontier Income Trust
Jupiter Japan Income
Man GLG Undervalued Assets
Pantheon International Redeemables
Old Mutual Gold & Silver
Polar Capital Biotechnology
Polar Capital Global Convertibles
Polar Capital Global Insurance
Polar Capital UK Value Opportunities
Ruffer Gold
RWC Global Convertibles
Woodford Patient Capital

AEW UK Long Lease REIT
Impact Healthcare REIT
LXi REIT
Phoenix Spree Deutschland
PRS REIT
Warehouse REIT

Ashmore Emerging Markets Short Duration
Ashmore Emerging Markets Total Return
Barings European High Yield Bond
GCP Asset Backed Income
GCP Infrastructure
ICG Longbow Senior Secured UK Property Debt
M&G Global Macro Bond
M&G UK Inflation Linked Corporate Bond
RM Secured Direct Lending
Royal London Short Duration Global High Yield
Schroder Strategic Credit
TwentyFour Income
TwentyFour Monument Bond

Henderson UK Absolute Return
Jupiter Absolute Return
Old Mutual Global Equity Absolute Return
Henderson Alternative Strategies
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dlp6666 on 13/11/2017(UTC)
King Lodos
Posted: 10 October 2017 20:45:48(UTC)
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They do make a good advert for diversification .. I mean the equivalent LifeStrategy fund gets you to about the same place, but Hawksmoor give you a smoother ride, and *potentially* a less risky one (being that they spread their eggs into quite a few more baskets).

RIT Capital Partners hold a lot too:

CSX Corporation1
Trian Partners Co-Investment2 Nestlé
Petrobras ADR
S&P Global Inc3
Höegh LNG Holdings
Mitsubishi UFJ Financial
Allergan Swap
Reckitt Benckiser Swap
Other Stocks
Total Stocks
Long-only Funds:
HCIF Offshore
Morant Wright4
BlackRock Emerging Markets Lansdowne Developed Markets Strategic Findlay Park Mexico4
Tekne Long-Only
Trian Partners
Emerging India Focus
Other Long-only Funds
Total Long-only Funds
Hedge Funds:
BlackRock European Hedge
Martin Currie Japan
Soroban
Gaoling
Palestra Capital
RIT Discovery5
Three Corner Global
Other Hedge Funds
Total Hedge Funds
S&P 500 Futures
Euro Stoxx 50 Futures
MSCI World £ Index Swap
GS Custom Industrials Swap
Euro Stoxx Banks Futures
Equity Options
Other Derivatives
Acorn
Rockefeller & Co
Helios Towers
Infinity Data Systems
Dropbox
CSL
EDRRIT
Thrive Capital Funds
Augmentum I
3G Special Situations
Gaoling – Unquoted
BDT Capital – Annex Fund I-A
Gobi Fund II
ICQ Holdings 6
Eisler Capital Fund
Attestor Value Fund
Elliott International
ENA Opportunity Offshore Fund Farmstead Fund
Blue Mountain Credit Alternatives Fund Sand Grove Tactical
JPS Credit Opportunities Fund
Emso Opportunity Strategies Fund Oaktree Strategic Credit Fund
Other Absolute Return & Credit
Total Absolute Return & Credit
Spencer House
Investment Properties
BlackRock World Gold Fund
Gold Futures
Other Real Assets
Total Real Assets
Government Bonds & Rates:
UK Interest Rate Swaps6
US Interest Rate Swaps6
Interest Rate Options
Currency Contracts
Other Investments
Total Other Investments
Total Investments
Liquidity
Total Liquidity
Commonwealth Bank of Australia Loan National Australia Bank Loan
RIT Senior Notes
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dlp6666 on 13/11/2017(UTC)
Tim D
Posted: 10 October 2017 21:03:51(UTC)
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A M;51800 wrote:
What proportions do other readers have? I am still working but could retire at any time now - I am doing the "if it gets too bad I'll pack it in".


I put up some info on my holdings in the thread here. I'm not ready to claim I've retired yet. More... downshifted.

A M;51800 wrote:
I was toying with putting it into equities (Vanguard Global All Cap Fund or a Lifestrategy fund) but wondered what percentage of my holdings to keep in cash / equities / bonds / property.


There's no "right" proportions, if you were hoping someone was going to enlighten you by revealing some magic numbers. It'll vary depending on personal financial objectives and circumstances, attitude to risk and loss etc etc.

I'm a user of Vanguard's Lifestrategy funds (80 and more recently added 60). However today I just directed some money into L&Gs multi-index funds for the first time instead. You might find the asset breakdown of those across the various risk levels offered quite interesting.

1 user thanked Tim D for this post.
A M on 11/10/2017(UTC)
Tyrion Lannister
Posted: 10 October 2017 21:58:42(UTC)
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Joined: 03/03/2017(UTC)
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A M;51800 wrote:
I have a cash ISA just matured and retaining it in cash is going to pay virtually nothing, as we all know. Even if interest rates are increased soon I can't see that making much difference to Cash ISA returns for a very long time.

I was toying with putting it into equities (Vanguard Global All Cap Fund or a Lifestrategy fund) but wondered what percentage of my holdings to keep in cash / equities / bonds / property.

What proportions do other readers have? I am still working but could retire at any time now - I am doing the "if it gets too bad I'll pack it in".

The last time I checked my allocation was approximately:

50% Equities
20% Bonds
25% Cash
5% Property REITs (Not house or physical property)

I haven't included my home in the above, but it would throw all those allocations out heavily towards physical property if I did include it.





Your allocation looks spot on to me and not a million miles from mine except I'm closer to 60% equities/10% bonds. Personally, I don't see the point in putting too much in bonds when you've a sizeable cash allocation.
1 user thanked Tyrion Lannister for this post.
A M on 11/10/2017(UTC)
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