Investments

SWP's back said:
Be a little wary of property right now. The 12-24 month outlook is pretty grim. It doesn’t react quite as fast as equity to central bank rate hikes but mortgages are going to be a lot more expensive for the next couple of years and that will dampen property price increases and may see a largish fall over that period of time.

As with anything, a nicely diversified portfolio can help to reduce exposure to any one particular asset class. Eggs and baskets etc.
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dickie davies said:
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Ok so it’s commercial property looking at the top 10 holdings. That’s not going to be hit in quite the same way as residential property but it will still work (or move) slower than equities and that fund still has nearly 20% in retail property.

Again, this is only generic advice and if I was right every time I’d have retired at 30 or be running my own fund, but I’d be looking at taking your nice profit on that and moving away from property for a while. It’s likely a huge proportion of your estate already has property (main residence) anyway and as I’ve said, I don’t see a good next 12-24 months for it.

This is hard for me to explain with words but if we agree that most assets move around based on the prevailing ‘real’ economy (ie jobs, wages, money in pocket/disposable income, interest rates etc etc), the stock market will always move 6-12 months ahead of the real economy. So when the real economy is doing very well and looks as though it will continue to do so, then the markets will go up. When something is on the horizon for the real economy but hasn’t actually struck yet, the market will usually see it, expect people to spend less in the next year on goods and so the market drops as investors expect lower profits and so demand drops.

Property is still causally linked to the real economy, but the nature of commercial contracts and their length means that it usually reacts after the real economy. This is great in years like 2022 where the markets were down hard at the start and middle of the year (but appear to be on the rise again) but property didn’t feel the effects of rate hikes/inflation until recently so continued to grow. Now the real economy is filtering into and being felt commercial, industrial and retail property, prices are dropping and are likely to continue to do so in the short term.
 
SWP's back said:
Ok so it’s commercial property looking at the top 10 holdings. That’s not going to be hit in quite the same way as residential property but it will still work (or move) slower than equities and that fund still has nearly 20% in retail property.

Again, this is only generic advice and if I was right every time I’d have retired at 30 or be running my own fund, but I’d be looking at taking your nice profit on that and moving away from property for a while. It’s likely a huge proportion of your estate already has property (main residence) anyway and as I’ve said, I don’t see a good next 12-24 months for it.

This is hard for me to explain with words but if we agree that most assets move around based on the prevailing ‘real’ economy (ie jobs, wages, money in pocket/disposable income, interest rates etc etc), the stock market will always move 6-12 months ahead of the real economy. So when the real economy is doing very well and looks as though it will continue to do so, then the markets will go up. When something is on the horizon for the real economy but hasn’t actually struck yet, the market will usually see it, expect people to spend less in the next year on goods and so the market drops as investors expect lower profits and so demand drops.

Property is still causally linked to the real economy, but the nature of commercial contracts and their length means that it usually reacts after the real economy. This is great in years like 2022 where the markets were down hard at the start and middle of the year (but appear to be on the rise again) but property didn’t feel the effects of rate hikes/inflation until recently so continued to grow. Now the real economy is filtering into and being felt commercial, industrial and retail property, prices are dropping and are likely to continue to do so in the short term.
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I get exactly what you say and thanks for taking the time to post
This property fund is about 30% of my pension investments
The mixed investment fund holds around a further 35%, a "with profit" fund 25% and the rest in an American fund and UK Equities



 
SWP's back said:
Sounds like you’re doing pretty well looking after your own finances.

Text book answer would say to ensure you have 3-6 months expenses covered in a cash account (that can include bank term deposits or premium bonds etc), with the rest, increase your funding into your existing investment account. If it’s more than your remaining ISA allowance then set it up into a non-ISA account (something like a unit-trust feeder account that automatically tops up your ISA each year - the investment stays the same, the ISA tax wrapper simply covers more with each passing year).

If you’re worried about under diversifying by putting it into the same funds then there are a million ETF’s that track indexes and/or a mixture of equities and fixed interest.

As you’re currently a little way off retirement and cover your expenses quite easily, I’d say that going in on the S&P500 in an ETF wouldn’t be a bad shout to help diversify away from your existing portfolio - assuming you’re not in it already.

Number of factors for that:

  • It’s very low cost and will automatically rebalance.
  • It’s nicely diversified across a number of industries (tech, pharma, energy etc)
  • It’s experienced a fairly bad past 12 months - which is good as the average S&P500 bear market lasts 13 months and the average bull market that follows lasts 4 years and sees 167% growth.
  • You won’t have to pay any adviser to look after it for you.
  • It’s averaged 11% net per year over the last 30 years - which takes into account the dot com bubble bursting as well as covid and the credit crunch.
  • You’re not relying on the Tories not continuing to fuck up the U.K. economy.
  • It looks like the US is past peak inflation and whilst they may still stall a bit in terms of the economy, the market prices that in 6-12 months ahead of time which also means the market can and will continue to grow before any recession ends.
  • I personally think the US stock market has already seen its bottom and whilst it will continue to show increased volatility over the next 12-36 months, I believe we will see positive growth during that time.
NB: obviously the above is incredibly generic advice and can’t be taken as individual financial advice, I don’t know you personally and haven’t undertaken a full factfind nor have I undertaken a steps necessary to ascertain your capacity and appetite for risk - a wholly equity based ETF isn’t for everyone.

I personally moved a large amount of my portfolio - the part that I “play” with and that’s not actively managed by professionals - into the S&P500 about two weeks ago and I intend to keep it there for at least the next 5 years.

If you’re looking for something more balanced that has a 60:40 equity/fixed interest split then Vanguard 60:40 Life Strategy is one of the best multi-asset funds around for a balanced investor.
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SWP's back said:
Be a little wary of property right now. The 12-24 month outlook is pretty grim. It doesn’t react quite as fast as equity to central bank rate hikes but mortgages are going to be a lot more expensive for the next couple of years and that will dampen property price increases and may see a largish fall over that period of time.

As with anything, a nicely diversified portfolio can help to reduce exposure to any one particular asset class. Eggs and baskets etc.
Click to expand...
Sweep thanks mate, I could probably give a few pointers here but I'm no expert.
 
dickie davies said:
I get exactly what you say and thanks for taking the time to post
This property fund is about 30% of my pension investments
The mixed investment fund holds around a further 35%, a "with profit" fund 25% and the rest in an American fund and UK Equities



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I see no issues with holding either of those two long at all, nicely diversified. I can only see the issue being a bit of pain in the short term on the property fund as I mentioned but even then, it’s not going to drop to zero and there’s a 90%+ chance it will see positive growth over the medium to long term (5 years plus).
 
paulchapo said:
It's a minefield. I took early retirement six years ago and recently met a financial advisor with Skipton about transferring a smaller pension I have that's just sitting there as I'm not contributing to it now as I'm not working. Also some savings. He wants 2.5% to do so which I thought was excessive.
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All I can say on that is that it depends on the amount. To fully transfer a pension (Defined Contribution as that what it sounds like) is upwards of a good ten hours work and a good 4-8 weeks in terms of time span.

If it’s sub £50k then it’s not too excessive, if it’s Defined Benefits then it’s a great deal more work.

Out of interest, with you having retired, why not leave it where it is and take flexi drawdown now? Consolidation can make things administratively easier but if it’s a small pension, you can always drawdown on it as income and just pay income tax on it.
 
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