Gyroscopic Investing

Hi,
I am a newbie to this forum, but I have been reading the posts with great interest. I just have a few questions for anyone here.

• Is PP only suitable for pre-retirement or retirement investments only?

• Is it ok to have global PP portfolio

My situation is that: I am very pessimistic about next few years at the moment and like the ideas of PP where there is gold and some bonds. I used to be having equity heavy portfolio when I started investing two years ago.

I am 31 years old with a stock and shares ISA which is a UK tax free accounts for individuals to top up just over £15k a year.

My pot is made up of this, although I am not sure if any of non-UK folks here will be familiar with?
It had done well for a few weeks after Brexit, but now gold component is falling terribly.

Bond - Vanguard Global Bond Index Inc
http://www.morningstar.co.uk/uk/snapsho ... 0P0000SV4I
Bond - Vanguard Global Short-Term Bond Ind Inc
http://www.morningstar.co.uk/uk/snapsho ... F00000SK5Z
Equity - Vanguard LifeStrategy 100% Equity Inc
http://www.morningstar.co.uk/uk/snapsho ... F00000MLUT
Equity - iShares Edge MSCI World Minimum Volatility UCITS ETF USD (Acc) (GBP)
http://www.morningstar.co.uk/uk/etf/sna ... 0P0000XOKV
Gold - iShares Physical Gold ETC
http://www.morningstar.co.uk/uk/etf/sna ... 0P0000SV4I
Cash - Cash is in UK accounts outside of ISA

Any of your advice appreciated.
Thanks you.

My only comment is that some people have pointed out that minimum volatility funds had become over bought, not sure if this is still the case after the Trump rally started, but I favor generic index funds (not factors). But I like fundamental weighted funds like FNDX as opposed to market cap weighted. I don't think weighting qualifies as a factor.

Welcome mmo!

To answer your questions: the PP is the ultimate "lifestrategy" portfolio. You can use it at any age, and it requires no "age-in-bonds" type tweaking as you go. It also automatically incorporates cash investments, so your emergency cash fund becomes part of the portfolio rather than being kept separately.

There are many posts on ex-US PPs on this forum, and many specific to the UK. I confess I hadn't paid too much attention to these, but the main points are that cash and bonds should be in your local currency. A global stock fund is a decent choice. Why did you go with a lifestrategy fund though, rather than something like Vanguard's total world index?

The problems I see in your list are the bond funds you are using. The bond and cash portions of the PP are supposed to be Treasuries for a reason: they are safe haven assets. So you need to find funds that are as close as you can get to 100% UK gilts/short term bonds, or buy the bonds directly if you can. Bond index funds contain a lot of debt instruments that can quickly turn toxic in a market crash - you may remember that in 2008 some money market funds lost value and/or were locked up. Also, they hold a lot of corporate bonds, which unsurprisingly correlate strongly with stocks. For durations, you want 20+ years for the long bonds, and < 3 years for the "cash"/short term bonds. A Treasury money market fund (or equivalent) is good if you have that available.

Thanks Sophie and Ochotona for helpful comments.

I also have to add that my allocation is a bit modified too, I am not sure if I really need to be 25% for each asset.
Mine looks something like:
15% bonds
20% cash
40% stocks
25% Gold

I just concerns a bit about bonds because of the possibility of rising interest rates. I may be wrong, I chose short term bonds because of the same reason too, as they are supposed to be less sensitive to interest rates than long dated bonds. I do like the ideas of having government bonds (UK gilts?) I will find out if there is any passive on offer for this.

I choose vanguard lifestrategy as it is available in the fund platform I am using for my ISA. It is here: https://www.fidelity.co.uk. Thanks again for pointing out about corporate bonds, I need to review what is it in the bond funds I got.

Hello mmo ! I'm also newbie in this forum .



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Dissertation Proposal

I think an international/global PP is a perfectly good idea. The main thing is you have to figure out if you want to hedge or ride currency movements of your home country. I believe that PP is too light on growth for a younger person and would tilt more to equities. I personally do mostly a classical PP but with leveraged ETFs as I want a higher rate of return. By the book this should be considered as a VP and my name for the approach is the VP PP. I like the mix of assets as a portfolio but what I'm doing certainly does not have the same stability/smooth ride characteristics of a normal PP.