Fluke wrote:Mememe wrote:Depends what their idea of ‘low risk’ actually means. What most people on here are suggesting are purely equity based investments.
Not all, the Life Strategy funds for example are a mixture of equities and bonds which you can adjust according to your risk profile - 80/20, 60/40 etc
Mememe wrote: That’s fine as long as ‘low risk’ means being willing to accept 50% falls in market crashes. I’m not sure that your bog standard guy on the street would regard that as low risk
Unlikely though for any of the funds suggested here, take for example VWRL mentioned in a few posts, from its high point in Dec-19 to it's low point in March it fell just under 22% before recovering sharply, it's now down just over 9% from its December high. And that following one of the biggest crashes in a long time.
https://www.vanguardinvestor.co.uk/inve ... stributingGranted it didn't set the world on fire for the 5 years shown in the graph but it protected your money and grew a bit which is what you want out of an index fund isn't it. Seems pretty low risk to me.
I take your point on the lifestrat funds I assumed people were talking 100% n(my bad) but yes the 20/80, 40/60 and at a push maybe the 60/40 could be regarded as low risk. People might argue the point regarding bonds at the minute though.
I'd check your figures on the drop on VWRL, I've looked at the price high and price low from 2020 and it dropped more than that. Lets be honest it's only because of unprecedented monetary policy (a US election incoming) that prices have recovered so quickly. However putting that aside, when it's your money fine. When it's someone who finds choosing an investment overwhelming then they might have a different outlook. It's not has it happened, it's could it happen, and a fall of 50% in equity markets is more than possible. Or as Geoff noted 75% in the 70's.
Risk is subjective, but an all world tracker does not protect your money. It just follows the market. Stimulus has totally distorted the market this time round, but at some point reality has to set in. If you could have sat in front of the investor you're talking about, in the middle of march, when they were 30/35% down, with markets falling 10% in one day on some days and they would have been fine about it then an all world tracker is the place (which incidentally I'm very much in favour of for those willing to take on that risk), if they wouldn't have been then I would not be investing in purely equity markets. In which case then the lower risk lifestrat funds (which did hold up pretty well because of daily rebalancing) or something similar (like the L&G Multi-index funds which throw in infrastructure, commodities, property in a passive format on top of bonds and equities) would probably be the place to be.
Just throwing in a different outlook on risk, not a dig at you, because although there's lot of clued up people on these forums, I think it's easy to be blase about market falls when you're used to them. For a newbie, risk is something that they eventually learn to accept or sends them running for the hills as soon as there's a 10% drop never to be seen in the markets again. I would just ask them how they would feel if the money invested dropped by 50% (even if it then eventually recovers) and if they aren't up for that, then an all world 100% equity tracker is not for them. Not at the start anyway.