Reply With QuoteStay invested but perhaps move some of your portfolio to more cautious investments. Personally I'm moving more of my portfolio to emerging markets ATM whilst looking out for income producing investments.
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Most of my 'wealth' (ha!) is in the house or cash but I do have a sipp, spread across 5 funds.
If I believe the arguments, and they are pretty convincing, that shares are currently overvalued, should I consider moving the sipp funds to something safe and boring or would one expect ones fund managers to also see it coming and move the funds assets in to steady shares that should fare better than most.
No crystal balls of course but I'd appreciate any opinions anyone has to offer.
I don't plan to take the pension for at least fifteen years but of course if you can get out high and back in low you stand to make a bit extra.
Last edited by Jeremy67; 19th June 2017 at 08:20.
Stay invested but perhaps move some of your portfolio to more cautious investments. Personally I'm moving more of my portfolio to emerging markets ATM whilst looking out for income producing investments.
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Just make sure your fund is suitably diversified and you should be fine.Originally Posted by Jeremy67
Trying to time the ups and downs of the bigger market is an impossible feat.
Stay invested, if you are not comfortable with your risk, reduce it.
I did some analysis a few years ago on the income history of the Australian sharemarket, compared to the income available from interest on cash. The volatility of income earnings was much greater from the cash than shares; the volatility of the share price was obviously much greater than that from cash.
What is your longer term reason for the investment. If it's only to be able to sell at a profit, and you can't face the prospect of the market dropping, then it might be worth adjusting your holdings; if you want to maximise income prospects and minimise income volatility, and you can bear it if the fund price moves up OR down, a number of well diversified funds is probably not a bad idea, for the longer term.
It's always difficult / near-impossible to time the market. Any stories you've heard to the contrary are likely to show survivor bias. That is you tend to hear more from the people who managed this rare feat, than from those who moved out of an asset, and lost.
Having said that, if Comrade Corbyn manages to get into power; legislate a Marxist state and kill the economy, longer term earnings growth may be harder to achieve...
Diversification is the key. 5 funds (unless they are very flexible) sounds a little too narrow for my taste. But as has been said it's about your personal view of risk. I accept lower returns in order to mitigate any losses. As long as I'm above inflation so I'm getting real growth then I'm happy.
To be fair, any fund will contain between 50 and a couple of hundred financial instruments. If you buy more than 5 funds, the outcome is overdiversified and your return will be "the market" minus fees. Much better to buy an index funds in that case: less fees, same diversification.
This can be true but most of the funds I am in are a fairly focussed on a sector. e.g UK Smaller Companies. Still room for massive diversity within this though as you say.
As long as my portfolio beats trackers and beats inflation then I'm happy. But again you need to keep an eye on things and make changes if performance slips. I tend to look once a month and compare with movements in the major indexes. I make decisions about performance about once a year. Within that my IFA has a pretty free hand to manage the portfolio.
You've got fifteen years, plenty of time to be steady Eddie.
I'd be into emerging markets and small caps.
Although I am already retired I still like some exciting funds.
Cheers,
Neil.
The more you diversify, the more predictable your return becomes. You own the whole market, you get the return of the market. When you own about 80% of market cap, you might as well buy a (much cheaper) index fund. That goes within small asset classes (such as small cap or emerging markets) as much as with large asset classes. In order to own 80% of the market cap, you only need to own the 20% biggest names (good old 80/20 works every time).
That's why you need to diversify amongst markets and asset classes.
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