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Simplify for draw-down or embrace the chaos?

Including Financial Independence and Retiring Early (FIRE)
Gilgongo
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Simplify for draw-down or embrace the chaos?

#417424

Postby Gilgongo » June 5th, 2021, 8:44 am

In our accumulation phase of retirement investing, my wife and I have collected a total of 65 holdings of various kind. I'm generally happy with the overall allocation I think - could be more international perhaps (non-UK equities at about 25%).

Spread across ISAs, SIPPs, an employer pension and some fixed income accounts (my wife''s not a tax payer), it's all a bit chaotic perhaps. I guess I spend maybe a couple of hours or so a month on maintenance. But don't find it too tricky on the whole.

With perhaps another 5 years to go until retirement, I've been thinking whether we should simplify all this though.

Do people generally simplify things for draw-down? I'm assuming the rationale is that you don't want to be wondering about corporate actions and things in your dotage.

jonesa1
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Re: Simplify for draw-down or embrace the chaos?

#417429

Postby jonesa1 » June 5th, 2021, 9:51 am

So long as you have a clear decummulation strategy and you're comfortable managing that across the portfolio, then there may be costs and little benefit from simplification. For the longer term you could build simplification into the approach you use for accessing funds (eg by selling entire holdings and investing any surplus into your long term holdings) and maybe start that process now for new investments.

mark88man
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Re: Simplify for draw-down or embrace the chaos?

#417431

Postby mark88man » June 5th, 2021, 9:53 am

I think it would help if you characterised the holdings, eg individual stocks and shares, the various types of funds, etc . I think 65 is a lot but if 35 of them were in a well diversified HYP portfolio then not so much. My worry would be you are replicating the entire market with your various convictions so why wouldn't you achieve the same thing a lot cheaper with one large global tracker (equity or even multi asset) then have some side/satellite funds if you feel you can second guess the market. That is what I do, and am sometimes right.

Darka
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Re: Simplify for draw-down or embrace the chaos?

#417432

Postby Darka » June 5th, 2021, 9:56 am

Personally, I've gone for the simplification route.

Reasons:
1) If I die first, I don't want my wife (zero financial interest) struggling with having to learn too much
2) To smooth investment income, I've been moving over from individual shares to Investment Trusts (growth and income)
3) To improve diversification

I now have 25 holdings in total (13 shares and 12 IT's) - all future money goes into IT's and if/when I sell down individual holdings, that money also goes into IT's.

I will probably keep some of the shares and don't intend selling anything at the moment, but wouldn't want too many more holdings than I have already.

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Re: Simplify for draw-down or embrace the chaos?

#417438

Postby AleisterCrowley » June 5th, 2021, 10:31 am

Do you think you have beaten/will beat a simple global tracker such as Vanguard VWRL?
Or, if you want a UK bias, Vanguard LifeStrategy 100
(just for illustration, there are slightly cheaper ways to achieve global and UK weighted exposure)

My investments are a right mess, but I'm gradually moving over to passive trackers like VWRL. I still have the occasional active spasm, but I'm trying to deal with it...
I figure I may have less time/inclination/ability to manage a complex portfolio as I get older (I'm 55 - planning on retiring in couple of years)

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Re: Simplify for draw-down or embrace the chaos?

#417447

Postby kempiejon » June 5th, 2021, 12:15 pm

AleisterCrowley wrote:Do you think you have beaten/will beat a simple global tracker such as Vanguard VWRL?
Or, if you want a UK bias, Vanguard LifeStrategy 100
(just for illustration, there are slightly cheaper ways to achieve global and UK weighted exposure)

My investments are a right mess, but I'm gradually moving over to passive trackers like VWRL. I still have the occasional active spasm, but I'm trying to deal with it...
I figure I may have less time/inclination/ability to manage a complex portfolio as I get older (I'm 55 - planning on retiring in couple of years)


You know I'm inclined to believe we're all going to be better at looking after ourselves and investments than we appear to give ourselves credit for. That said I'm another with a few years to go before I draw and my holdings number at least 65. I've got 3 ISAs, a private pensions and a SIPP each with their own trend. Perhaps as I get older my plans or inclination to peer over websites, accounts, RNSs and spreadsheets will change and I'll chop it all in for a global tracker and cash but for now at least I enjoy the research and fettling with the portfolios. I also know that over the past 2 years my USA and tech has done best, UK much less so and emerging markets between the two; a global tracker about 50% USA has captured more of the USA strength and much less of the other two's relative weakness.

Gilgongo
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Re: Simplify for draw-down or embrace the chaos?

#417457

Postby Gilgongo » June 5th, 2021, 1:23 pm

mark88man wrote:I think it would help if you characterised the holdings, eg individual stocks and shares, the various types of funds, etc .


The bulk of the direct holdings are in a pretty classic HYP of 24 holdings in an ISA. Then we have two Lunibasket L7s bought at different times in SIPPs. Then some other ITs and ETFs for diversity here and there, along with some ETFs for bonds and gold.

I hesitate to post the whole lot as it's quite a long list, but if anyone wants to see a table (sorted by current value %?), I can.

AleisterCrowley wrote:Do you think you have beaten/will beat a simple global tracker such as Vanguard VWRL? ... I'm gradually moving over to passive trackers like VWRL.


Heh - good question! Probably not. Yield-wise, I think I've beaten it (about double by my reckoning), but I realise yield isn't the whole story. I have in fact got VWRL in there and use it as a kind of "soak away" along with some ITs when I can't think what to top up in my HYP. Maybe I might just start winding the HYP out into that set of assets (currently City of London, iShares Asia Pacific, Merchants Trust plc, VHYL and Henderson Smaller Companies)? Originally, I just planned to switch the dividends from being re-invested to being use for income. But HYP management overhead is fairly high at times, and as Darka points out, if I die first it would fall to my wife who has no interest in finance.

jonesa1 wrote:So long as you have a clear decummulation strategy and you're comfortable managing that across the portfolio


That's a good point too. I think I'm clear on decummulation strategy - but keep doubting myself. Probably one for another post!

Dod101
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Re: Simplify for draw-down or embrace the chaos?

#417465

Postby Dod101 » June 5th, 2021, 1:43 pm

I don't think anyone needs to see the entire list but you have used the word 'chaos'. IF you mean that then that is not a good strategy for investing. Keep it simple for your own sake and your successors. If you are happy with the asset allocation, ITs, individual shares, bonds, trackers or whatever, then divide your holdings up in to these categories and first cull very small holdings since these are going to have very little effect on your outcome whether they do well or poorly. Then take a look at any consistently poor performers and consider culling those. Were I you I would try to get my holdings down to no more than say 30/35. With that number you have a good chance of keeping close tabs on each of them.

Of course you will then need to have a plan for drawdown. If you just drawdown the dividends that is easy because it does not entail any sales. You just collect the dividends.

Dod

Gilgongo
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Re: Simplify for draw-down or embrace the chaos?

#417478

Postby Gilgongo » June 5th, 2021, 2:42 pm

Dod101 wrote:I don't think anyone needs to see the entire list but you have used the word 'chaos'. IF you mean that then that is not a good strategy for investing. Keep it simple for your own sake and your successors.


I suppose it's not exactly chaotic, but the number of investments and their performance, sector, type, etc. feels quite chaotic to think about in terms of draw-down. So perhaps I need to move into a phase of consolidation. Your suggestions about smaller holdings, etc. seem like a good place to start as there are certainly a few of those (eg Dixons, TP Icap in my HYP). I can't help thinking of my 24-share HYP as a single unit though, so selling down part of it into, say, ITs feels painful.

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Re: Simplify for draw-down or embrace the chaos?

#417491

Postby 77ss » June 5th, 2021, 4:37 pm

Gilgongo wrote:
Dod101 wrote:I don't think anyone needs to see the entire list but you have used the word 'chaos'. IF you mean that then that is not a good strategy for investing. Keep it simple for your own sake and your successors.


I suppose it's not exactly chaotic, but the number of investments and their performance, sector, type, etc. feels quite chaotic to think about in terms of draw-down. So perhaps I need to move into a phase of consolidation. Your suggestions about smaller holdings, etc. seem like a good place to start as there are certainly a few of those (eg Dixons, TP Icap in my HYP). I can't help thinking of my 24-share HYP as a single unit though, so selling down part of it into, say, ITs feels painful.


I think 65 holdings to be too many, and I believe that you should regard your portfolio as a single whole, rather than as discrete lumps - an HYP, a basket of ITs etc. Particularly if viewing it in lumps is hindering you from taking action.

With 65 holdings, how many form less than 1% of your overall portfolio? If you have a few such holdings perhaps you should decide whether or not to increase or dump. If you are not happy increasing them - that may tell you something.

Over the years, as I gradually switched from individual equities to ITs, the number of my holdings increased and I now have 42. Three are under the 1% figure. One will go next week and the other two over the next couple of years - as and when I need to offset XS capital gain.

Dod101
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Re: Simplify for draw-down or embrace the chaos?

#417492

Postby Dod101 » June 5th, 2021, 4:43 pm

Gilgongo wrote:
Dod101 wrote:I don't think anyone needs to see the entire list but you have used the word 'chaos'. IF you mean that then that is not a good strategy for investing. Keep it simple for your own sake and your successors.


I suppose it's not exactly chaotic, but the number of investments and their performance, sector, type, etc. feels quite chaotic to think about in terms of draw-down. So perhaps I need to move into a phase of consolidation. Your suggestions about smaller holdings, etc. seem like a good place to start as there are certainly a few of those (eg Dixons, TP Icap in my HYP). I can't help thinking of my 24-share HYP as a single unit though, so selling down part of it into, say, ITs feels painful.


You must do as you feel best and most comfortable with. I was just putting up some suggestions to help you maybe get into a slightly different mindset. Always useful I find, but you do not need to take any action. I live off my investments and have no pension except the State one so they are important to me. I find that my 30 or so investments are quite enough to keep an eye on. Another thing that I do is at least once a year (usually on 1 January) I rank my investments in order of for want of a better word, 'desirability'. That word can have whatever meaning you want and it means that if I feel like moving into another share, I have a fairly good idea what share or shares to cull to find the cash.

Good luck anyway.

Dod

Gilgongo
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Re: Simplify for draw-down or embrace the chaos?

#417602

Postby Gilgongo » June 6th, 2021, 8:06 am

77ss wrote:With 65 holdings, how many form less than 1% of your overall portfolio? If you have a few such holdings perhaps you should decide whether or not to increase or dump. If you are not happy increasing them - that may tell you something.


A rough count shows a handful, and most of those I would be happy to sell up on grounds of poor performance. Interesting too about regarding everything as one portfolio rather than as I tend to do now: a HYP and then "the rest". Starting to see this as an indication that I should start to wind out the HYP on grounds of "ease of maintenance" (although the question is what to? I'm sure there's a thread on that somewhere)

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Re: Simplify for draw-down or embrace the chaos?

#417618

Postby Darka » June 6th, 2021, 9:07 am

Gilgongo wrote:Interesting too about regarding everything as one portfolio rather than as I tend to do now: a HYP and then "the rest". Starting to see this as an indication that I should start to wind out the HYP on grounds of "ease of maintenance" (although the question is what to? I'm sure there's a thread on that somewhere)


I also treat my collection of HYP shares and IT's as a single portfolio, makes things easier (for me) and any recent sales of single shares (due to performance, cancelled dividends, etc) have all gone into IT's.

During the worst phase of the Coronavirus downturn I sold out of all of many of my HYP shares which cancelled their dividends and reinvested into both income and growth IT's.

I knew I was selling those shares at a low, but that I was also buying into the IT's at a low and that those IT's were much more likely to recover strongly when the market did, which was the case for me - in addition I didn't suffer any dividend cuts as along with some new investment money I ended the year up compared to 2019 in both dividends and capital.

I will keep some of my HYP shares as some have done really well (RIO, BHP, LGEN, ULVR, BAE, etc) but other than that I prefer IT's these days, the stability of the income (yes, at a cost to the capital growth) is exactly what I need in retirement, which will hopefully start at the end of this year.

I do invest in both income and growth IT's as I believe a combination of the two is far better for me, I get the income I need and the growth that I would like.

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Re: Simplify for draw-down or embrace the chaos?

#417629

Postby Wuffle » June 6th, 2021, 10:07 am

For those that want simplification, and have a fondness for ITs, would anyone go all the way?
I refer to BMO Managed Portfolio for growth and / or income (according to taste).
A step too far?

W.

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Re: Simplify for draw-down or embrace the chaos?

#417636

Postby Degsy67 » June 6th, 2021, 10:44 am

Asset allocation strategy? 100% equities?

Decumulation strategy? Living off dividends only in which case what’s the yield of the portfolio? Combination of dividends and selling capital? What’s your planned withdrawal rate?

These are the main questions for decumulation. After that then you can look at your holdings to see if they are appropriate. Personally I would massively simplify. Two hours a month could be better spent enjoying yourself and not sweating the small stuff.

Degsy

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Re: Simplify for draw-down or embrace the chaos?

#417637

Postby swill453 » June 6th, 2021, 10:47 am

I'm about 65% (mainly) income ITs, 25% tracker ETFs and 10% preference shares. Everything is ticking along quite nicely at the moment, producing enough income for our needs.

However every now and again I'm tempted to jack it all in and put the lot into VWRP, the accumulation version of Vanguard's world tracker ETF. I would then have to spend no time whatsoever managing or looking at it, only dipping in once a year to sell some to top up my cash buffer. No more dividends, ever!

Not sure what's stopping me doing this - I think if I'd done it, say, a decade ago then I'd be much better off financially than I am now.

Maybe I like the small amount of management (tinkering) that I do - keeps the brain active.

EDIT - VWRP possibly wasn't around 10 years ago, but that's not the point...

Scott.

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Re: Simplify for draw-down or embrace the chaos?

#418413

Postby 77ss » June 9th, 2021, 4:10 pm

Gilgongo wrote:
77ss wrote:With 65 holdings, how many form less than 1% of your overall portfolio? If you have a few such holdings perhaps you should decide whether or not to increase or dump. If you are not happy increasing them - that may tell you something.


A rough count shows a handful, and most of those I would be happy to sell up on grounds of poor performance. Interesting too about regarding everything as one portfolio rather than as I tend to do now: a HYP and then "the rest". Starting to see this as an indication that I should start to wind out the HYP on grounds of "ease of maintenance" (although the question is what to? I'm sure there's a thread on that somewhere)


Thanks for starting this thread. It has made me look at my own holdings with a view to reduction/simplification and continuing my gradual move into ITs.

As said previously I had 42 holdings, with 3 under 1% by capital. One has now gone and the other 2 will go at some stage. 39 is still more than I want so I am now looking at the sub 2% ers. I had 7. Disposed of 1 this morning and will keep an eye on the other 6.

FWIT, my replacement for individual equities is ITs. Both this weeks disposals went towards topping up existing holdings. Now over 50% in ITs. I can see myself ending up with about 30 holdings. 2:1 in ITs and individual shares. No rush though.

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Re: Simplify for draw-down or embrace the chaos?

#418544

Postby xxd09 » June 10th, 2021, 9:53 am

Each to their own
I have gradually tidied up my/our savings as old age approaches-wife and I now 75
2 ISAs .2 SIPPs, 2 State Pensions, 1 Teachers Pension ,1 Cash Savings Account, I Bank Current Account (joint),1 Credit and Debit Card (joint)
3 Investment Funds only -all world trackers-equities and bonds
3 Children who are executors told
Now losing the will and interest to make any more major changes-
Probably this to the finish
xxd09

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Re: Simplify for draw-down or embrace the chaos?

#418858

Postby genou » June 11th, 2021, 2:46 pm

xxd09 wrote:....1 Credit and Debit Card (joint).....
Probably this to the finish
xxd09


The debit card is joint, and will survive the first of you to go, but the credit card is not. That may mean one of you will immediately cease to have a credit card. That may not be what you intend.

xxd09
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Re: Simplify for draw-down or embrace the chaos?

#418886

Postby xxd09 » June 11th, 2021, 5:09 pm

Thanks for that info -will pursue it further
Joint Credit Card Account but I note that we have different numbered cards
Interesting that Bank Account operates differently
xxd09


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