Should retirees be 100% invested in equities?

[conor_mc]

I really don’t understand this logic.

Surely the 100% equities for life brigade would counsel my retiree to reverse any previous life styling and revert to 100% equities.

If not, why not?

This thread is about how best to invest in retirement. How the portfolio got to where it is at that stage is beside the point.

Ah look, surely your retiree has already blindly followed industry practice. Could go around in circles all day on this. I made my point that I think it was unrealistic to start with equal pots when Colm’s point is that a 100% equities guy most likely started 2000 with a bigger pot.

I don’t recall anybody suggesting moving a conservative portfolio to 100% equities on date of retirement. Seems like you’re arguing against a case nobody has made, and twisted quite a bit to get there.

 

[Marc]

I really don’t understand this logic.

Surely the 100% equities for life brigade would counsel my retiree to reverse any previous life styling and revert to 100% equities.

If not, why not?

This thread is about how best to invest in retirement. How the portfolio got to where it is at that stage is beside the point.

I also made this point which seems to have been missed.

In the accumulation stage sequence of returns doesn’t matter. So investors can keep a higher equity bias for longer if they are buying regularly.

This was my criticism of lifestyle/target date funds which is what started off this whole debate.

 

[Sarenco]

I don’t know the answer to this, mainly because I’ve never thought about it, but intuitively sequencing of returns risk should surely mean that 30:70 transitioning to 90:10 over time could deliver outcomes that vary quite considerably from a steady 60:40 allocation?

Sure but what I mean is there’s no reason, ex ante, to expect one portfolio to outperform the other.

The glide path portfolio certainly mitigates the SORR issue to a greater extent but you are compressing the time that you have the higher allocation to equities. In other words, it’s not a free lunch.

 

[Sarenco]

I don’t recall anybody suggesting moving a conservative portfolio to 100% equities on date of retirement.

Ok but in that case why would anybody suggest retaining a 100% equity portfolio on retirement?

Logically it’s the same thing.

 

[Brendan Burgess]

I have no idea why my post disappeared.

Your post disappeared because it was meaningless and this thread has enough meaningless posts already.

Your new post is meaningful so it's fine.

Brendan

 

[Steven Barrett]

I think we can all agree that equity returns in good times are beautiful. I think we all understand that what goes down can also go up! The point of the thread is to discuss whether investors should be 100% in equities. It seems clear to me that all-in equities should be a minority sport and I'm genuinely struggling to see how advocating a not well diversified, self-selected stock picked all equity portfolio is a sensible or implementable strategy for all but the few. I'm not always a total fan of Marc's posting style but, in fairness to him, in this thread, he has given very clear views.

Having a heavy equity exposure is not the same as having an all-equity exposure. Having all your ARF all invested in equities is not the same as an all-equity exposure when you've other income streams (DB pension, annuity, rental, etc.) apart from social welfare!

If someone came in to me with money to invest, be it into a personal investment, pension of ARF, we always ensure that they have an adequate cash fund that they can use in the case of a downturn or when they need it.

There's no reason to complicate things. Keep it simple and you are more likely to stick to your plan.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[Louisval]

If someone came in to me with money to invest, be it into a personal investment, pension of ARF, we always ensure that they have an adequate cash fund that they can use in the case of a downturn or when they need it.

There's no reason to complicate things. Keep it simple and you are more likely to stick to your plan.

Yey - thanks Steven - another vote for common sense. Interesting and reassuring that no financial adviser (that I'm aware of) has yet to agree with this blanket all equity punt being advocated by some on this site.

I remember my financial adviser discussing with me how he tries to balance "willingness, ability and need to take investment risk" when suggesting an asset allocation range for clients. That just seems sensible. I really can't fathom how some people are trying to complicate things by over-simplifying them! [ALL EQUITIES GOOD, OTHER APPROACHES BAD!]

I suppose that, at the very least, people who read these threads and decide to go all equity won't be able to say.........nobody warned me this could go smelly!

Just one question in passing. Duke of Marmalade mentioned last night that there were concerns/mutterings about index investments (I'm sure you've seen the post). Has this issue come onto your horizon? Has it prompted any change in advice to clients, etc.?

 

[ClubMan]

Yey - thanks Steven - another vote for common sense. Interesting and reassuring that no financial adviser (that I'm aware of) has yet to agree with this blanket all equity punt being advocated by some on this site.

Pensioners should have 100% of their investments in equities

But in Ireland, where most people with retirement funds own their own home I think this is key.........IMO one should think of their home equity as something akin to a cash reserve/bond allocation inside of their wider retirement asset pool allowing IMO a much higher allocation to equities in...

www.askaboutmoney.com

But in Ireland, most people with pension funds own their own homes and have a great inflation protected annuity, so they are not 100% in equities anyway.

 

[Marc]

Just one question in passing. Duke of Marmalade mentioned last night that there were concerns/mutterings about index investments (I'm sure you've seen the post). Has this issue come onto your horizon? Has it prompted any change in advice to clients, etc.?

This has been a concern since indexing first started in the 1970s.

The argument goes you need active managers to ensure markets work through price discovery.

If markets are becoming less efficient due to indexing you should see more managers beating the market. In the annual SPIVA score card https://www.spglobal.com/spdji/en/research-insights/spiva/

there is no evidence that managers are finding it easier to beat the market

 

[Sarenco]

there is no evidence that managers are finding it easier to beat the market

Some would even argue that the indexing revolution has taken a lot of “dumb money” out of the market, thus making it even more difficult for active managers.

 

[Louisval]

Thanks @Marc and @Sarenco

That's what I figured but just wanted to check.