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SIPP Investment Allocation
Joe 90
Posted: 12 April 2018 18:14:53(UTC)
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I have recently completed a transfer from Royal London into my new iWeb SIPP and am looking forward to choosing my investments. I keep reading about moving into less risky asset classes as retirement approaches (I have 4 years to go).

I am in the very fortunate position of being a high earner and having money in a small business that is virtually bomb-proof that will pay out on retirement.

If there was a significant market correction tomorrow I could live well for arguably 10 years. Is there any reason why I shouldn’t put my entire SIPP fund in equities?
Sara G
Posted: 12 April 2018 18:58:50(UTC)
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No reason at all... I don't take much notice of recommendations like that - everyone's situation is different. In my case my basic needs in retirement will be met by a FS pension scheme, so I am generally quite adventurous with my SIPPs. Having said that, going all in now might not be the best approach.
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Joe 90 on 12/04/2018(UTC)
Joe 90
Posted: 12 April 2018 19:07:40(UTC)
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I’m thinking: invest 50% now and drip the rest in over the next 6 months or so. That way I’m “in” the market so will benefit from any rises and have cash to buy more if the market falls.
Tim D
Posted: 12 April 2018 21:56:06(UTC)
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Joe 90;60529 wrote:
I’m thinking: invest 50% now and drip the rest in over the next 6 months or so. That way I’m “in” the market so will benefit from any rises and have cash to buy more if the market falls.


So then 6 months from now you're fully invested... but maybe only then does the market crash... say 40%. Are you prepared for that?
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Mickey on 13/04/2018(UTC)
John Griffiths
Posted: 15 April 2018 08:41:21(UTC)
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As Joe 90 says he has adequate access to other income for a number of years so can afford to ride out even a fairly lengthy market drop. Agree with Sara G that a mixture of investments like 60% equity 40% bonds/cash/property or similar might be a more prudent approach.
Chris Dean
Posted: 15 April 2018 21:01:54(UTC)
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Just don't make the same mistake as me! I had great intentions of drip-feeding the transferred lump sum into various funds but unfortunately, there was no facility to set up regular monthly transfers from the cash within the SIPP, so you have to discipline yourself to do this and I didn't! After only a few months, I took fright at the first wobble (Brexit), sat on too much cash for too long, tried timing the market to get back in and missed out on some great returns.

As far as allocation is concerned, current thinking seems to have moved away from traditional de-risking - you'll find umpteen relevant articles on Google. If you consider yourself financially secure for the next decade, 60/40 would perhaps seems a bit too cautious but much will depend on your own appetite for risk. And, remember, the best laid plans can go awry! In late summer 1987 I had accepted a good offer for our long-established business, only to see it fall through as a result of Black Monday! Fortunately, I was able to bounce back and carry on but I was thirty years younger then and had that happened nearer retirement it could have been pretty devastating, so you have to be prepared to think the unthinkable!

Good luck.

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Tim D on 15/04/2018(UTC), Joe 90 on 16/04/2018(UTC), Mickey on 16/04/2018(UTC)
Joe 90
Posted: 16 April 2018 13:01:15(UTC)
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Thanks everyone for all the very constructive responses. Certainly received wisdom suggests that some of my portfolio should be in lower risk assets such as cash and bonds. However my brain keeps nagging me otherwise.

I am a partner in a very steady professional firm that has been around for 200 years and has no external debt. I have capital and undrawn profits worth £250k. In a sense you could reasonably argue that this is something akin to a bond in any event.

After the death recently of a relative I stand to inherit £300k. I already have an equity portfolio (mainly in SIPP and ISAs) worth £700k.

Most likely worse case scenario is we have a stock market crash and a recession and the firms profits dry up for a couple of years during which my income would be significantly reduced but I’d still probably have a job.

If I invest my legacy in (more) bonds, you could argue I end up a 40:60 bond / equity split which seems conservative, even at the age of 56.

If on the other hand I view my ‘bond’ with the firm as my emergency cash I could ride out anything but a catastrophic crash without touching my equity portfolio.

I appreciate it’s a nice problem to have and I should seek advice (which is what I’m doing now on the brilliant forum).
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Tim D on 17/04/2018(UTC)
Mr Helpful
Posted: 17 April 2018 14:14:38(UTC)
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Joe 90;60526 wrote:
Is there any reason why I shouldn’t put my entire SIPP fund in equities?

There is a school of thought that advocates 100% Stocks at all times.
Reinforcement of this view is sought from charts such as :-
http://www.multpl.com/s-p-500-historical-prices

However the chart vertical scale is logarithmic, and therefore downplays the size of the drawdowns.
1929 was life-changing for so many with 80%+ losses (a wiggle on chart), with for many loss of job, etc; and left them asking through the thirties, "how could I have been so stupid as to be so heavily committed to Stocks?".
Gov't Bond investors however saw capital appreciation and the continuation of income.
Appreciate you have other means of support and 1929 and the 30's may we hope be an outlier.
So a personal decision then between aspiration (nearly said "greed"), or a balanced portfolio.
If the investor has wealth, maybe the first aim could be to design a portfolio to preserve that wealth in real terms?
2 users thanked Mr Helpful for this post.
Tim D on 17/04/2018(UTC), Joe 90 on 17/04/2018(UTC)
Joe 90
Posted: 17 April 2018 16:50:30(UTC)
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Thanks Mr Helpful, that’s very, er, helpful. Reference to the G word duly noted. I guess ultimately it hinges on how I classify my investment in the practice. I suspect it is rock solid to be honest, but in order that I can sleep at night I’ll probably end up fudging a bit.
Jon Snow
Posted: 18 April 2018 23:07:11(UTC)
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If you can afford to keep £500k in cash, instant access.

Then the other stuff doesn't really matter and you will sleep well at night.
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