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Can it be that simple?
Aminatidi
Posted: 04 January 2025 17:37:16(UTC)
#54

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Agree with every single word.

I think all I'm saying is until you've been there the whole "emotion v capacity" thing probably isn't as simple as it sounds.

Especially the emotion side.

I think most people have seen that "sheepdog" thread from Bogleheads.

https://www.bogleheads.o...m/viewtopic.php?t=25126

People blink.
1 user thanked Aminatidi for this post.
Sara G on 05/01/2025(UTC)
Wave Action
Posted: 04 January 2025 17:38:47(UTC)
#56

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Aminatidi;330105 wrote:
Agree with every single word.

I think all I'm saying is until you've been there the whole "emotion v capacity" thing probably isn't as simple as it sounds.

Especially the emotion side.

I think most people have seen that "sheepdog" thread from Bogleheads.

https://www.bogleheads.o...m/viewtopic.php?t=25126

People blink.


Nice 2024 summary with most questions covered. Number crunching from 20 minutes onwards stocks , cash , bonds etc.

https://www.youtube.com/watch?v=EKdiEjW0x0I&t

60/40

https://pbs.twimg.com/me...rmat=png&name=small

cash..

https://pbs.twimg.com/me...ormat=png&name=small
1 user thanked Wave Action for this post.
ANDREW FOSTER on 04/01/2025(UTC)
Big boy
Posted: 04 January 2025 20:40:34(UTC)
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Aminatidi;330105 wrote:
Agree with every single word.

I think all I'm saying is until you've been there the whole "emotion v capacity" thing probably isn't as simple as it sounds.

Especially the emotion side.

I think most people have seen that "sheepdog" thread from Bogleheads.

https://www.bogleheads.o...m/viewtopic.php?t=25126

People blink.


Would it be simpler if you took the emotion out of your decisions. I learnt you behave better without emotion and it stops you chasing all over the place.. keep it simple. Also don’t make any assumptions about the future ie how can you say what is going to happen tomorrow never mind 10/20 years time.
1 user thanked Big boy for this post.
Thrugelmir on 04/01/2025(UTC)
Elspeth Beaton
Posted: 04 January 2025 23:42:51(UTC)
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Joined: 11/12/2019(UTC)
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Leaving emotions out of investing decisions is a fine and laudable aim and should be worked at constantly
Unfortunately investors are only human -emotions are a large part of being a human being
Learning the discipline of unemotional investment decisions can be acquired but it’s a tough one and a long road for most investors
A skill worth acquiring though if you can manage it!
xxd09
4 users thanked Elspeth Beaton for this post.
Aminatidi on 05/01/2025(UTC), AlanT on 05/01/2025(UTC), bearcub on 05/01/2025(UTC), Helen L on 23/01/2025(UTC)
ben ski
Posted: 05 January 2025 00:12:39(UTC)
#52

Joined: 15/01/2016(UTC)
Posts: 1,357

Newbie;330100 wrote:

The way I see it, the biggest driver of wealth destruction often stems from lifestyle choices as much as it does about volatility in the markets. New found wealth generally leads to increased lifestyle (and fixed costs) despite the wealth actually being able to fluctuate. So perhaps a better option maybe to look at what you actually need and focus on that, both in investing and lifestyle choices.


Re: emotion

As every good horror director knows: people fear what they don't understand. Fear is always an abstract that lives in the shadows. Give a killer an origin story, and you're not watching a horror film. I think when people actually understand how bonds work, that cash is just another volatile asset class, etc. you don't worry about what prices do – they're all relative. It just helps you make decisions.

Re: lifestyle

There are very good arguments for frugality. Classic example was a librarian who saved every penny and retired at 50 a millionaire. The key point is: she was still a librarian.

As a counterpoint, when I see a bright young man parking an average, sensible car (Vauxhall, Nissan) in my carpark, I know he'll be working 40 hours a week forever. When I see a mixed race girl with a degree in communications (i.e. no real education) parking a new Mercedes A-class, probably leased, with the newest iPhone. I know she doesn't have anything in savings, but she'll be on 6-figures by the time she's 40. Or she'll have married wealthy. The car you drive, phone you use, clothes you wear... do dictate one very important thing: what you're willing to accept. Where you're willing to settle. I see an attractive female in a Ford, Honda, Fiat, etc. I know her husband's going to be the guy in the Vauxhall.
ben ski
Posted: 05 January 2025 00:38:05(UTC)
#58

Joined: 15/01/2016(UTC)
Posts: 1,357

Re: portfolio design

Stocks/bonds is foolproof. Like I said: most here don't really have a clue what bonds are or how to think about them. So you can easily derail this plan with your own jitteriness. But if you just stick to it, you'll do fine. You'll be in the top 1% of an environment like this, within 10-15 years (which is where compounding's only just beginning to be a factor – and compounding is where your wealth's going to come from).

But it's not optimal. If you really want the highest, most reliable return, you barbell: how can I generate the highest, reasonable return possible in my risk exposure, and how can I create the most robust downside protection in my risk-off exposure? So today, you would probably hold quite a significant amount in discounted private equity. For risk-off, there's no perfect asset class – but short duration index-linked bonds are probably the closest. In some ways they have the qualities of cash, bonds and real assets. But you really want a mix of durations, mostly very high quality, at least half pegged to inflation. And of course you rebalance ... And this kind of portfolio could look terrible over 5 years – but if you're hung up on 5 years, you don't really want to stray from an index tracker and probably 1-5 year treasuries.

5 users thanked ben ski for this post.
Helen L on 05/01/2025(UTC), Mr TIPS on 05/01/2025(UTC), Johan De Silva on 05/01/2025(UTC), Sara G on 05/01/2025(UTC), Guest on 23/01/2025(UTC)
Johan De Silva
Posted: 05 January 2025 10:05:07(UTC)
#59

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ben ski;330128 wrote:
But it's not optimal. If you really want the highest, most reliable return, you barbell: how can I generate the highest, reasonable return possible in my risk exposure, and how can I create the most robust downside protection in my risk-off exposure? So today, you would probably hold quite a significant amount in discounted private equity. For risk-off, there's no perfect asset class – but short duration index-linked bonds are probably the closest. In some ways they have the qualities of cash, bonds and real assets. But you really want a mix of durations, mostly very high quality, at least half pegged to inflation. And of course you rebalance ... And this kind of portfolio could look terrible over 5 years – but if you're hung up on 5 years, you don't really want to stray from an index tracker and probably 1-5 year treasuries.


A hybrid approach has worked fairly well in the SIPP, where I am asset-class agnostic but keep the sector weights of the index in mind. For example, I think we need to allocate about >40% into technology to match index's while introducing around 25% in private assets. This means significantly underweighting other sectors and listed-technology, lowering only some of the gains of the likes of NVIDIA, and we need to be aware of that and not stray too far away from the index.

I bet most of the forum (like most global funds) are underweight Financials, which has been my strongest driver of upside. I expect Financials to continue performing well if we have a strong economy and a decent neutral rate. We all need to be aware of various macro outcomes, including inflation, rates, and recession, not for portfolio construction if your passive but understand the reasons behind portfolio crashes to prevent capitulation. Not understanding "why" is the human phycology that in my opinion leads to capitulation.

I would hope everyone here would recommend to others outside this forum a passive index with age dependent amount of bonds. Most people I speak to about this stuff are way too bias and unwilling to be flexible quickly enough to think fast and as outlined in this non-investment book slow as well...

Book: Thinking, Fast and Slow: Daniel Kahneman
http://dspace.vnbrims.org:13000/jspui/bitstream/123456789/2224/1/Daniel-Kahneman-Thinking-Fast-and-Slow-.pdf (Can be purchased on Amazon)
1 user thanked Johan De Silva for this post.
ben ski on 05/01/2025(UTC)
Joe C
Posted: 05 January 2025 10:36:26(UTC)
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Jed Mires;329970 wrote:
A really simple 50% MSCI world and 50% MMF returned 13.26% year to date. If you are not gettings this return then you need to have a good think about your portfolio.



If an investor's plan is to give themselves a kicking every time their portfolio underperforms whatever just happened to do best last year - and impulsively re-arrange all the toys in their pram accordingly: they're in for a lot of years or hurt.

A little under 8% for me last year. But feeling better about the next fifteen years overrides the feeling of disappointment over the last one.

I’m not sure where girls in car parks, mixed race, attractive or otherwise, come into it.

5 users thanked Joe C for this post.
Sheerman on 05/01/2025(UTC), ravedeath on 05/01/2025(UTC), Guest on 05/01/2025(UTC), Jay P on 05/01/2025(UTC), Dexi on 05/01/2025(UTC)
Vince.
Posted: 05 January 2025 12:53:03(UTC)
#53

Joined: 09/05/2013(UTC)
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a
allocator3844
Posted: 05 January 2025 15:16:35(UTC)
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What about 0 - 5 years gilt ladder. 5 - 15 years 60/40 and 15 years + 100% global equity. Re calibrate every 12 months and not worry about the stock market. Simple but maybe effective ? Mine is not quite this but similar. Aged 62 retired. No income other than Flexi Drawdown.
2 users thanked allocator3844 for this post.
Guest on 05/01/2025(UTC), Sheerman on 05/01/2025(UTC)
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