What's your appetite for risk?
Discussion
Something that has always struck me about the Finance forum on here, and it may be perception, is that an awful lot of people seem to be invested entirely or almost entirely in risk assets.
I don't work in finance but I know if 100 people walked into an IFA 100 wouldn't walk out having been advised to be 90-100% equities and there was a figure James Shack (IFA on YouTube) mentioned in a video the other day which is that only around 30% of clients are comfortable or suited to 100% equities.
IFAs don't typically dump people in 100% equities and pensions don't by default.
So do we have a cohort on here who have an incredibly high appetite for risk? Or are some people in over their head but might not know it until a really bad day (or decade) happens and "buy the dip no longer applies?
Has anyone done a proper appetite for risk questionnaire to understand where that you they should be invested? Did it match with how you are invested?
Reading a number of recent threads has me wondering if I'm on a forum dominated by exceptions to the general population
I don't work in finance but I know if 100 people walked into an IFA 100 wouldn't walk out having been advised to be 90-100% equities and there was a figure James Shack (IFA on YouTube) mentioned in a video the other day which is that only around 30% of clients are comfortable or suited to 100% equities.
IFAs don't typically dump people in 100% equities and pensions don't by default.
So do we have a cohort on here who have an incredibly high appetite for risk? Or are some people in over their head but might not know it until a really bad day (or decade) happens and "buy the dip no longer applies?
Has anyone done a proper appetite for risk questionnaire to understand where that you they should be invested? Did it match with how you are invested?
Reading a number of recent threads has me wondering if I'm on a forum dominated by exceptions to the general population
What's more surprising to me is the quantity of people with absolutely no appetite for it whatsoever and will vehemently reject it.
Countless billions and trillions must have been burnt or thrown away because folk couldn't be arsed to spend a few minutes reading.
I knew someone who kept an inherited £250,000 in their current account for the best part of a decade.
Countless billions and trillions must have been burnt or thrown away because folk couldn't be arsed to spend a few minutes reading.
I knew someone who kept an inherited £250,000 in their current account for the best part of a decade.
When I switched to my current FA back in 2015 ish I certainly went through a Risk assessment and based on that recommendations were made.
From memory that score was circa 50 out of 100 in terms of ATR.
At that point the investments were to be placed in a combi of IIB’s , UT’s and ISA’s the latter vehicles being transfers of existing fund investment. The IIB was a new investment.
Previously the FA used had not done such a thorough RA but I was relaxed with this as knew the type of funds I wanted.
A few years ago I went through another RA when I transferred both a DB and a DC pension and also had another RA probably half way between those timeline points.
At the same time other investments which I wanted to maintain myself including IT’s ,cash based types and other funds managed separately were described to the FA in terms of general quantum’s.
Fwiw the “main “ Pension is currently in about 75% EQ / 25% Bond funds and the others are almost entirely EQ based.
I’ve been drawing down on the main pot for coming up 4 years in May ( I’m now 64 ) and have also withdrawn the entirety of my TFC as early inheritance towards my Adult children's house purchase funds.
From memory that score was circa 50 out of 100 in terms of ATR.
At that point the investments were to be placed in a combi of IIB’s , UT’s and ISA’s the latter vehicles being transfers of existing fund investment. The IIB was a new investment.
Previously the FA used had not done such a thorough RA but I was relaxed with this as knew the type of funds I wanted.
A few years ago I went through another RA when I transferred both a DB and a DC pension and also had another RA probably half way between those timeline points.
At the same time other investments which I wanted to maintain myself including IT’s ,cash based types and other funds managed separately were described to the FA in terms of general quantum’s.
Fwiw the “main “ Pension is currently in about 75% EQ / 25% Bond funds and the others are almost entirely EQ based.
I’ve been drawing down on the main pot for coming up 4 years in May ( I’m now 64 ) and have also withdrawn the entirety of my TFC as early inheritance towards my Adult children's house purchase funds.
When I was saving for my first house my appetite for risk was greater as was the potential reward & luckily it worked out for me long term in the end after an initial first few years of dips where I kept on buying. Now I invest more cautiously as I'm not working towards any long term goal other than maybe a larger house or retirement, so I'm happy just to beat the pitiful saving rates.
I don't know about "incredibly" high risk as it doesn't really feel that way to me (and it depends how you define/measure risk anyway, which is no trivial question in itself).
But my asset allocation/strategy would probably be considered quite high risk even by most diehard equity investors' standards: late 40s, gave up work a few years ago, living off returns from a portfolio overwhelmingly invested in UK small/midcap equities, keeping a few years' expenses in cash/MMFs and a fully offset mortgage besides that. Probably even more so right now in fact as ~30% of my overall portfolio is in one company.
However I'd say that I've actually structured my financial affairs in the broad sense quite defensively, and I feel familiar enough with what I own and assured in how long I've been doing this (and active in markets more generally) to feel comfortable on the whole.
But my asset allocation/strategy would probably be considered quite high risk even by most diehard equity investors' standards: late 40s, gave up work a few years ago, living off returns from a portfolio overwhelmingly invested in UK small/midcap equities, keeping a few years' expenses in cash/MMFs and a fully offset mortgage besides that. Probably even more so right now in fact as ~30% of my overall portfolio is in one company.
However I'd say that I've actually structured my financial affairs in the broad sense quite defensively, and I feel familiar enough with what I own and assured in how long I've been doing this (and active in markets more generally) to feel comfortable on the whole.
I probably wouldn't class myself as a very high risk taker. If someone asked me what I was invested in, I'd probably tell you it's all in a global tracker - it's unlikely I'd mention cash because I don't really class that as "invested" or my pension which is set to "age appropriate" unless it was specifically asked.
I think the other reason is probably that PH has a typical user who has more money than the UK average by virtue of being interested in cars; those in the finance sub-section probably have more money than the average PH user I'd guess and therefore their risk appetite is likely to be higher because they're not relying on these funds day-to-day and can afford to take a much longer view, at which point equities make more sense.
I think the other reason is probably that PH has a typical user who has more money than the UK average by virtue of being interested in cars; those in the finance sub-section probably have more money than the average PH user I'd guess and therefore their risk appetite is likely to be higher because they're not relying on these funds day-to-day and can afford to take a much longer view, at which point equities make more sense.
Edited by AyBee on Wednesday 7th January 16:10
I think the default HL SIPP fund is about 85% equities - or at least the one they dumped me in was.
I’ve since set it as 10% MMF, 20% Cash, 10% Gold, 10% Equities ETFs (largely defence), 50% global trackers.
I’ve no idea where it sits for risk, but it feels about medium - which is what I’m happy with.
I’ve since set it as 10% MMF, 20% Cash, 10% Gold, 10% Equities ETFs (largely defence), 50% global trackers.
I’ve no idea where it sits for risk, but it feels about medium - which is what I’m happy with.
bloomen said:
What's more surprising to me is the quantity of people with absolutely no appetite for it whatsoever and will vehemently reject it.
Countless billions and trillions must have been burnt or thrown away because folk couldn't be arsed to spend a few minutes reading.
I knew someone who kept an inherited £250,000 in their current account for the best part of a decade.
If those trillions were spent on equities instead of fixed interest, would that also mean they’d have performed even better due to demand?Countless billions and trillions must have been burnt or thrown away because folk couldn't be arsed to spend a few minutes reading.
I knew someone who kept an inherited £250,000 in their current account for the best part of a decade.
But then fixed interest would have to face higher yields to attract investors, sooo?
And/or would retail investors just cause more volatility and bubbles?
I struggle with this concept that a whole paradigm can change and yet the outcomes remain the same.
Hindsight investing just wouldn’t work.
butchstewie said:
Something that has always struck me about the Finance forum on here, and it may be perception, is that an awful lot of people seem to be invested entirely or almost entirely in risk assets.
It's the internet. People like to talk about the things that do, or they perceive might, generate high returns.It's also possible that the actual amounts at stake might not, in some (many?) cases, be as high as some would like you to infer and I doubt there are many betting the farm on very risky stuff.
LooneyTunes said:
It's the internet. People like to talk about the things that do, or they perceive might, generate high returns.
It's also possible that the actual amounts at stake might not, in some (many?) cases, be as high as some would like you to infer and I doubt there are many betting the farm on very risky stuff.
If one discusses fund returns on PH we often have a deluge of posters achieving hugely outperforming figures, with those underperforming conspicuous by their absence. One must also factor in the Walter Mitty and fantasist effect.It's also possible that the actual amounts at stake might not, in some (many?) cases, be as high as some would like you to infer and I doubt there are many betting the farm on very risky stuff.
I think “de-risking” your portfolio used to be a much bigger thing back when you had to pick a day that was going to be your lot & buy an annuity. Since pension freedoms & flexible drawdown were introduced people are a little more able to recover from shocks in markets & it’s potentially not such an issue.
Also yes - PH’ers are not typical Investors
Also yes - PH’ers are not typical Investors
Didn’t Shack do a video recently saying the best chance of funds lasting was to be as high equities as you can stomach?
Stewie your change of stance has been noted on each thread, don’t you worry about that
I’m nearly all equities, haven’t touched a penny of my investments for over half a decade and still building the pot so not too fussed to address anything other yet. I personally see a global fund as a far lower risk item than just sp500 which many on here and elsewhere solely stick to, and I’m sure beyond that there are many are heavy tech only which is another step of risk before you get to the crypto crowd.
Stewie your change of stance has been noted on each thread, don’t you worry about that
I’m nearly all equities, haven’t touched a penny of my investments for over half a decade and still building the pot so not too fussed to address anything other yet. I personally see a global fund as a far lower risk item than just sp500 which many on here and elsewhere solely stick to, and I’m sure beyond that there are many are heavy tech only which is another step of risk before you get to the crypto crowd.
okgo said:
Didn t Shack do a video recently saying the best chance of funds lasting was to be as high equities as you can stomach?
I don't think those two views are mutually exclusive are they?That might be your best chance statistically and historically.
That's not the same thing as your actual appetite for risk and what you can stomach and Shacks experience as an advisor can also be that only 30% of people he encounters suit 100% equity exposure.
Point taken above about context.
I guess definitions vary but I'm talking pretty much your net worth and what your financial future depends on outside of emergency fund/cash savings.
Not a £5K play pot on T212 or whatever.
Doesn't it depend on a bunch of things including age, employment, etc, but mostly, when you might need access to the money?
In the past, I have replied to folk on here pointing out that someone about to retire at 55 has the same investing horizon as the 35 y.o does to standard retirement, i.e. 30 years. And with a 30 year horizon why wouldn't you want to be *mostly in equities? As such, I don't think I'll be cashing out of the S&P on my 55th birthday...
I suspect the devil is in the detail though - I'd generally say "I'm all equities" - we've even gone IO on the mortgage and are investing instead , but :
My pension (10 years away from early retirement) is nearly all in equities - nearly because there is a bond component in one of the lifestyle funds (~10% of the total of all pots).....But then the wife has a teacher's DB pension which should probably be factored into the overall risk picture as a low-risk piece of the puzzle..
My ISA is a mix of MMF(safe) and S&P (longer term), and I've also got ~50% in single stocks as well (from former employers) which on paper almost certainly makes the overall look higher risk I guess....
So are we high risk, low risk, all equities etc... well kinda...it depends what you mean...
In the past, I have replied to folk on here pointing out that someone about to retire at 55 has the same investing horizon as the 35 y.o does to standard retirement, i.e. 30 years. And with a 30 year horizon why wouldn't you want to be *mostly in equities? As such, I don't think I'll be cashing out of the S&P on my 55th birthday...
I suspect the devil is in the detail though - I'd generally say "I'm all equities" - we've even gone IO on the mortgage and are investing instead
, but :My pension (10 years away from early retirement) is nearly all in equities - nearly because there is a bond component in one of the lifestyle funds (~10% of the total of all pots).....But then the wife has a teacher's DB pension which should probably be factored into the overall risk picture as a low-risk piece of the puzzle..
My ISA is a mix of MMF(safe) and S&P (longer term), and I've also got ~50% in single stocks as well (from former employers) which on paper almost certainly makes the overall look higher risk I guess....
So are we high risk, low risk, all equities etc... well kinda...it depends what you mean...
The default plan of my previous and also the current employer's pension scheme was very heavy in equities for someone in their 30s/40s. If that is common I think many people that don't do any investing except making pension contributions might actually be quite risk-seeking investors through their pensions?
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