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Apropos of nothing ... and everything

A helpful place to also put any annual reports etc, of your own portfolios
Newroad
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Apropos of nothing ... and everything

#447346

Postby Newroad » October 2nd, 2021, 9:03 pm

Evening All.

As per the title, this topic references nothing specific - yet references everything, as it is an overall musing on the sub-portfolios of my family (and when viewed as a whole "the portfolio"). The sub-portfolios are three pairs of ISA, JISAs and SIPPs - each pair performs very similarly due to their near identical structures.

In the second calendar quarter of 2021, after a process lasting around 18-24 months, everything has been consolidated, moved into tax efficient (largely nil tax) structures and the major sales and purchases executed. The basic forms are

    ISAs 66/34 Equities/Bonds: MWY/VWRL/HDIV/VAGP
    SIPPs 66/34 Equities/Bond: ATST/VWRL/BIPS/VAGP
    JISAs 75/25 Equities/Bond: FCIT/VWRL/BIPS/VAGP

In addition to these

    I have a decent Final Salary Pension, currently maybe £15K or so per annum, plus a lump sum three times that, plus some other bits and pieces elsewhere, e.g. from my current employer and in another country which I can't bring to a UK SIPP
    Mrs Newroad has an Aegon Blackrock Lifepath DC pension from her current employer, I'm guessing that's about 75/25 Equities/Bonds, plus various stock options
    The kids also have MNP in their JISAs, which sits outside the above ratios as it is their grand-parental contribution from one side, it probably adds another 15% or so to each JISA.

Anyway, with all this now sorted and stable, I've started tracking accumulation units for each sub-portfolio as of close of play 30/06/2021 - twice per month (one end of month, one after each regular investment mid-month). Took a short while to set up first time, but is now very easy - each update just requires copying a row in a spreadsheet and updating one field. I chose £100 for the starting unit price for each unit - meaning percentage performance from that base is available on inspection. For anyone interested (thought it's a very short period - three months only - hence fairly meaningless)

    ISA's: Have been up as much as 4.48% but are now up only 2.01%
    SIPP's: Have been up as much as 3.09% but are now up only 1.69%
    JISA's: Have been up as much as 4.20% but are now up only 1.23%

As a consequence of having this accurate accumulation unit data available, I've now stopped monitoring the synthetic version of the sub-portfolios and am also looking forward to June 2022 - when VAGP will be 3 years old. At this point, it will start being available in the aggregated Morningstar Data available free from II.

What I've also only recently had the time to do is add our cash holdings into the mix, which has led to the following percentage ratios (Equity/Bonds/Cash)

    Me: 48/26/26
    Mrs Newroad: 54/29/17
    Child 1: 79/21/0
    Child 2: 80/20/0

    Me & Mrs Newroad together: 52/28/20
    Family Overall: 59/26/15

The relatively low equity percentage caught me by surprise - or expressed another way, the effect of the various cash holdings was greater than I intuitively expected. Yes, this is the "worst" point of the month for that measurement (i.e. just been paid and not yet done the regular investments) and I'll check again later in the month, but I'd only expect that to affect the numbers by a percent or two (we'll see!).

Clearly the kids ratios are fine, but I probably need to get mine and Mrs Newroad's up over time, so I'll start pushing up the target from 66/34 to 70/30, then gradually calibrate from there (likely with a view to get the equity component in the cash inclusive ratios to 66% or thereabouts).

As I said, these are mainly just musings and may not be much of interest to others, but if nothing else, will provide a reference point as to my point-in-time thinking when I look back.

Regards, Newroad

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Re: Apropos of nothing ... and everything

#447362

Postby tjh290633 » October 2nd, 2021, 10:19 pm

You will find those accumulation unit calculations valuable as you go along. I think you gave your age in another thread, but while a cash reserve is always desirable, that bond proportion is way out of line. Although it may give some comfort during market downturns, it does not provide the growth in value and income that equities do, and equities have always recovered from bear markets. Just because the FTSE100 is little changed from its value at the end of 1999 does not mean that equities have been static. Look at the history of FCIT for proof of that.

TJH

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Re: Apropos of nothing ... and everything

#447408

Postby Newroad » October 3rd, 2021, 9:58 am

Thanks, TJH.

I'm in my early 50's.

I actually agree (now) that the bond proportion is too high - but only because I've factored in the cash properly. Also, the bond holding is slightly illusory, as the active half of the bond holdings (either HDIV or BIPS as listed earlier) if viewed on a spectrum are probably more closely correlated with equities (e.g. VWRL) than the other bond holding (VAGP). HDIV and BIPS hold predominantly developed market non-investment grade debt of varying timeframes, whereas VAGP holds intermediate term investment grade debt.

If I can gradually get the equity holding to around 66% as indicated (excluding the JISAs) and the rest a mix of cash and bonds, I'll be happy enough with that.

On equities recovering, that has always been true in the very long term thus far. My currently plan is to retire in 9 to 10 years and I can see a scenario where if the current ride does go pop at some point, the ensuing bear market could easily overlap that timeframe - even more so if viewed in real terms. Let's hope not!

Regards, Newroad

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Re: Apropos of nothing ... and everything

#447430

Postby Steveam » October 3rd, 2021, 11:06 am

You mention the decent pension ... I always view secure pension payments as a bond like payment and value the pension as a bond asset (some multiple of the annual payment) and see the pension this way for asset allocation purposes.

Best wishes,

Steve

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Re: Apropos of nothing ... and everything

#447582

Postby Newroad » October 3rd, 2021, 8:42 pm

Hi Steve.

There has been much discussion on this matter in a different thread.

For what it's worth, I agree with you more than I don't (i.e. that a defined benefit income stream is more like a bond proxy than anything else). However, it's not identical, e.g. you can't rebalance and sell some of that DB stream to buy equities if, for example, the stock market corrects/crashes etc.

Regards, Newroad

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Re: Apropos of nothing ... and everything

#450408

Postby Hariseldon58 » October 15th, 2021, 4:47 pm

The equity proportion does seem fairly low given you have 10 years prior to retirement and throw in pensions and probably not much later the state pensions.

My personal thoughts would be in the 85% to 95% range for equities.

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Re: Apropos of nothing ... and everything

#450573

Postby Newroad » October 16th, 2021, 12:59 pm

Indeed, HariSeldon.

It does appear too low - it goes to show how unless the numbers are done accurately and all inclusive, one can draw false assumptions. It will gradually "correct", as we're dumping quite a bit of money into both ISA's and SIPP's now each month. I'll be closely monitoring the single month effect (i.e. how much the equity ratio increases) post II's free regular investing this Wednesday.

I'm not sure exactly what your 85-95% equities refers to, but if overall, I think it's too high. However, if you mean that to achieve my 66% target overall taking into account cash etc, then it may need those levels in the ISAs and SIPPs to achieve that. Of course, both our opinions as to target levels are just that :)

Regards, Newroad

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Re: Apropos of nothing ... and everything

#451837

Postby Newroad » October 20th, 2021, 11:25 pm

Hi All.

For anyone interested, today was the II free regular investing day. As a consequence of this, the ratios have moved from (as noted earlier above) equities/bonds/cash

    Me: 48/26/26
    Mrs Newroad: 54/29/17
    Child 1: 79/21/0
    Child 2: 80/20/0

    Me & Mrs Newroad together: 52/28/20
    Family Overall: 59/26/15

to

    Me: 51/26/23
    Mrs Newroad: 57/29/15 (yes, I know this adds up to 101 - simply a rounding anomaly)
    Child 1: 80/20/0
    Child 2: 80/20/0

    Me & Mrs Newroad together: 54/28/18
    Family Overall: 61/26/13

As you can see, we bought no bond investments this month as we up the equity ratios towards the revised targets.

Regards, Newroad


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