Asset allocation ideas

I think I’ve finally settled on an asset allocation strategy that I feel comfortable with.

I am going to start with a 80/20 split between equities and bonds.

For the bond component, I might use this fund:

Vanguard Investments Funds ICVC-Vanguard U.K. Long Duration Gilt Index Fund A GBP Gross Accumulation

For the equity portion I’m going to keep things simple by using 4 equal chunks:

25% Vanguard US Equity Index Acc
25% Vanguard FTSE Developed Europe ex UK Equity Index Acc
25% Vanguard FTSE U.K. All Share Index Unit Trust Accumulation
25% Vanguard Global Emerging Markets Fund A GBP Acc

Some initial thoughts:

Yes, 80/20 is a little bit high – but better than the 100% equities I currently have! I need a degree of risk if I’m to stand any chance of growing my portfolio to my target £0.5M+ value within the next 10 years.

Yes, I quite like Vanguard funds 🙂 But I will consider other options.

This design makes it easy for me to change the equity/bond ratio in future, if I want less risk. I would just need to change the overall ratio and then divide the equity portion by 4.

I am not sure when the right time will be to implement this allocation strategy – considering my fund is still down following last week’s panic 🙁

Are bonds the right thing to be buying? I’ve heard a lot of negative press about them lately, which I don’t fully understand. I get the feeling the most I would get from them is to cover inflation each year!

Thoughts?

Tuesday morning panic

I awoke on Tuesday with a feeling of panic. I had only just discovered before going to bed (via a number of tweets on my timeline) that the Dow Jones had dropped heavily. I went to bed without checking my portfolio (head in the sand syndrome!), filled with dread. Not surprisingly, I didn’t sleep well that night.

One of the things that compounded how I felt was the heavy decline in the crypto markets over recent days, which I have a vested interest in. I was honestly thinking “there goes both my option 1 and option 2 FI plan in one fell swoop”.

You see I had only recently completed the transfer of my SIPP (and ISA) from one provider to another. I had deliberately sold my investments before initiating the process so that it was a quicker cash-only transfer (or so I thought). It still took the best part of 2 months before I was fully vested again though.

As such I was keen to get my money working again after this 2 month hiatus. As I had not yet settled on the desired mix for my portfolio, I went all-in (£210K SIPP & £28K ISA) with one particular fund: Vanguard U.S. Equity Index Fund (ISIN GB00B5B71Q71). I had researched this fund previously and it looked a good fit for what I am trying to achieve. Recent year returns have been exceptional.

OK, so I know what you are thinking. Who puts all of their eggs in one basket? It’s risky enough to hold 100% equities – but to have them all in one geography too? You must be crazy, Fork! Well perhaps.

I really did fear that it was the end of the world on Tuesday morning. But things don’t seem so bad just 24 hours later. Yes my portfolio is down 5%, but I’m sure it will recover. I’m just glad I held my nerve and resisted the temptation to panic-sell (for what would inevitably be an even bigger loss). I certainly contemplated it for a short period!

The main lesson to take away from this experience is to understand the feeling of absolute dread that one small market correction had on me. I really thought it was the end of the stock market’s bull run, and I had made the classic mistake of investing at the very peak. I had even just finished reading a book on investing that explained how to average-in with large investments, to avoid exactly this scenario! If that was my response, then I’m clearly not as much of a risk taker as I thought. I will continue working on what my ideal portfolio should look like.

January 2018 status update

Well, it’s my first attempt at a status update and I honestly don’t know how best to write it. So rather than procrastinate for days/weeks/months like I usually do, I’m just going to draft something and click publish. It’s better than nothing and will hopefully improve over time!

January was a good month financially as I managed to save £2,630. Not too shabby! In fact unusually high for recent months. I notice that other bloggers post a percentage of income figure to show their savings rate – I’m not quite sure what formula to use here, as I’ve seen different ones used. So I’ll leave that until a future post when I understand it a bit better.

My SIPP and ISA performance were non-existent – mainly because I decided to transfer them both from HL to IWeb (expect a separate article on that at some point). That took longer than planned so my investments have sat around in cash for the best part of two months. Hopefully they will be back on track soon.

Matched betting brought in £245.84, which I’m happy with. My plan is to only work on one offer at a time (I get confused with some of the more complicated ones if I’m trying to progress multiple offers together).

Finally, P2P lending brought in £217.41 – the first time it’s peaked above the £200 mark. Very satisfying!

So that brings January’s savings total to £3,093.25.

I’m sure this post will need editing over the coming days. I would certainly welcome any feedback that might help improve my blog! 🙂

No news is good news

No, really.

Around a month ago, I decided to give up on news. Much of my day was wasted consuming news. During the working day, I would follow @BBCBreaking on Twitter and constantly click on my BBC News browser bookmark.

I would pride myself on being bang up to date on major events occurring in the world – often before others around me knew anything of them.

After work I would often make a point of turning over to the news at 18:00 (when I typically eat my dinner). Sometimes even the 22:00 news too – habits (I am quite sure) that have been subconsciously passed on from both my parents and grandparents.

But Mrs FmC has always been the complete opposite. She avoids the news and has no interest in watching it. I can now understand why.

Let’s face it – there is rarely any good news. Most of it is negative and depressing. From Brexit scaremongering to terrorist related atrocities, the typical news is doing us no favours.

The other thing I realised is that none of this news is relevant to me as an individual. I am not missing out as a result of not knowing. I feel relieved.

I did worry at first of appearing ignorant to others due to this change in habit. But then I remembered from Brené Brown’s excellent book Braving the Wilderness (which I just finished) that it’s OK to stand alone. I am an individual and proud of who I am.

So although I am still subject to news bulletins on the radio and various other sources – I am very happy with my choice to cut down on exposure to news. It has definitely made me feel happier.

Black Friday

So today is Black Friday. As if you didn’t already know! We have been bombarded with Black Friday adverts for what feels like weeks already.

We need to talk, Black Friday.

I’m not exactly sure how to say this …

But this year I refuse to take part.

In previous years I have scoured the internet for much of the day intent on finding the ultimate bargain. I bought things that I thought I needed as well as things I definitely didn’t need. It gave me satisfaction which was short lived. That in itself is a clue to it being unnecessary.

No means no—OK, Black Friday? No means no.

I will not be manipulated to buy things I don’t really want or need.

But I have pretty much everything I need in life and am determined to be mindful with any new purchases. I am starting to declutter superfluous belongings in my home – and one of the obvious prerequisites has got to be stopping new things entering through the front door in the first place!

I also think that the majority of Black Friday deals are a scam. It is rare that you find exactly what you were looking for (i.e. something you had pre-planned to purchase, but decided to wait in case of discount opportunity). For those things that you do need (or purchase regularly) I find patience and using services such as camelcamelcamel are far more effective for buying at the lowest price possible.

 

Quotes from No, means no, Black Friday. No means no. by Lindsey Burgess.