Approaches to deciding on spread of funds

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whytis

Registered User
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Apologies if the "Investments & Markets" forum would be a better place for this question.

I'm looking to purchase investment funds for my pension (my employment doesn't offer a scheme).

My question is: are there any standard ways of looking at how to split up your purchase of funds? Is there a popular+intelligent approach to saying "purchase this much in high-risk funds, purchase this much in medium-risk funds"?

My financial adviser got me to fill in an investment attitudes survey. He then made recommendations of how to split the purchase of funds (like 50% in one fund, 15% in another fund, and so on).

Over in the States, Dave Ramsey speaks about purchasing mutual funds, 25% in each of these categories:

* Growth
* Growth & Income
* Aggressive Growth
* International

It's that suggestion that I'm familiar with, and trying to match it up with my financial advisor's.
 
Dave Ramsey's primary objective is promoting Dave Ramsey...

The proposal you quoted

25% in each of these categories:

* Growth
* Growth & Income
* Aggressive Growth
* International

Could result in an extremely volatile if not down right risky portfolio and probably not what you want in a pension fund.

Do some research on proper asset allocation

What are your adviser's allocations as an alternative?
 
whytis said:
"Asset allocation" - at least now I have a name for this. Thank you.



Zurich funds:

60% Performance fund
25% International Equity fund
15% Active Asset Allocation

Any comments?
Click to expand...

You're doubling up there. The Performance fund is 65% - 90% International Equity. The Active Asset fund has 44% equities, the exact same equities that are contained in the Performance and International equity funds.

There are lots of different approaches to investing. I advise my clients to have a diversified portfolio, so spread your premium out amongst different funds that don't overlap each other.

You could always put 100% in the Active Asset allocation or use their new Pathway strategies. Pick whichever one suits your attitude to risk. The management charge is no higher than their other funds.


Steven
www.bluewaterfp.ie
 
Thanks Steven.

To understand more, I think I have to dig into the details:

Take the Performance fund by Zurich. How do you know that it's 65%-90% International Equity fund?

All I see on their public fact sheet is "Indicative equity range: 65% - 90% of the value of the fund". I took that to mean that 65%-90% of the fund is invested into stocks.
 
Look at the sector weightings on the factsheets, they are practically the same. The fund manager isn't going to pick different companies for different equity funds, they will be the same.



Steven
www.bluewaterfp.ie
 
Your age is a factor that's missing from this discussion. It's commonly advised to have a higher weighting in equities and higher risk/ higher return funds when the investor is younger and has more time to allow for cyclic highs and lows. When a person is older they are advised to switch to cash and bond funds so they are less likely to suffer losses just when they are going to retire. Some pension companies have this as a default option for their schemes.
 
Thank you paper-folder. I'm in my early 30s.

SBarrett said:
The fund manager isn't going to pick different companies for different equity funds, they will be the same.
Click to expand...

Steven - I do take it that there are different funds that offer different mixes of equities, correct? For example, there's technology-heavy funds, and "European business"-heavy funds, just as made-up examples.

Then the choice of asset allocation between equity funds would be what I'd have to study.
 
I use regional mixes e.g. a certain percentage in European, American, Asian etc.

If your advisor is worth his salt, he should have an asset mix designed for you. Otherwise, I'd use something like Zurich's Pathways strategy. There are 5 different asset mixes based on different risk profiles. Pick which one suits you best and stay with it for at least 5 years.



Steven
www.bluewaterfp.ie
 
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