That’s correct. Avoiding realising a loss in growth assets.Surely having a Cash position plus an Equity position gives one options to mitigate sequence of returns risk? That's a basic 2 bucket approach and seems more than simple mental accounting. Draw down from equities in a bullish period and draw down from cash in a bear period. The % allocation varies depending on one's risk appetite and you can also include a Bond element if desired.
Sorry but it’s not correct - it’s nonsense.That’s correct.
That’s very informative.@Deauville
Where to start?
Firstly, Zurich does not hold any meaningful amount of fixed-income securities that are denominated in anything other than euro in any of their funds. Prisma 2 is no exception.
There is a very good reason for that - you don’t want to take currency risk in what is supposed to be the “safe” element of your portfolio.
It is true that dividend growth stocks can sometimes outperform the broader equity market in a cyclical downturn (at the cost of lower long term return) but they are no substitute for bonds. It is far more efficient to construct a portfolio using a broad equity index tracker and adding a fixed-income fund to achieve your desired risk/return profile.
There is no “free lunch” in investing - if dividend growth stocks represented a better risk/return profile than the broader equity market, then investors would simply bid up the price of those stocks until that ceased to be the case.
There is zero evidence that active managers, on average, outperform their benchmarks during drawdowns. Zero.
Agreed about still drawing money from a portfolio that has fallen in value but doesn't a bucket strategy implicitly involve holding "sufficient levels of diversifying, low risk assets"?No, “bucketing” is mental accounting pure and simple.
If you draw money from a portfolio that has fallen in value, it doesn’t matter a jot whether you are drawing from the cash element of the portfolio or the equity element of the portfolio - you are still drawing money from a portfolio that has fallen in value!
You can never eliminate sequence of return risk - the best you can do is hold sufficient levels of diversifying, low risk assets to hopefully cushion the inevitable market falls.
They’re not - the geographical breakdown only relates to the equity holdings (I appreciate that’s not very clear from the factsheet).Why are Zurich holding North American bonds ?
Well, it might but the earlier discussion referred to “3x Years Distribution Bucket”.Agreed about still drawing money from a portfolio that has fallen in value but doesn't a bucket strategy implicitly involve holding "sufficient levels of diversifying, low risk assets"?
If that’s the case, it’s potentially very misleading. Especially as the equity holding is only less than about 10%. of the fund.They’re not - the geographical breakdown only relates to the equity holdings (I appreciate that’s not very clear from the factsheet).
But if you were 65 in 2000, you likely would have died years ago too given the average life expectancy is 82 (which is the highest in the EU as of 2022). The first ten years of retirement is generally the most expensive and afterwards people tend to settle down and watch the world change around them. My parents are pushing 80 and the state pension meets their needs with enough left for savings each week.Well, look what happened during the first decade of this century when we had two major stock market crashes.
If you started drawing a fixed €40k, adjusted for inflation, from a €1m stock portfolio starting in 2000 you would have gone bust years ago.
But you’re right, it is fairly conservative.
We only have one investment lifetime and we really can’t afford to have an unlucky run in retirement.
If you started drawing a fixed €40k, adjusted for inflation, from a €1m stock portfolio starting in 2000 you would have gone bust years ago
Actually you wouldn't.If you started drawing a fixed €40k, adjusted for inflation, from a €1m stock portfolio starting in 2000 you would have gone bust years ago.
I'd argue for converting the annual amount of DB pensions and state pension to a capital value and considering them to be fixed interest in the portfolioSo I'm sensing we're getting a consensus output from this thread namely hold 75%-80% of the ARF fund in a low charge passively manged global equity index tracking fund and most of the balance in Euro government bonds with maybe a small alocation in cash to cover 1 years deemed disposal as a cheap hedge against sequence of withdrawl risks. Most useful.
Fair enough but in the real world you can’t get exposure to an index on a cost-free basis - you have to make some allowance for fees and other investment expenses.If you invested €1m on 1/1/2000 and drew €40k on 31/12/2000 and so on adjusting for USD inflation and MSCI returns you would have €179k left today.
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