What percentage of the £170,000 would you put into each fund?

11 February 2022

Question by Duncan

Hi,

I currently have £170,000 invested in a Scottish Widow pension in the following funds:

. North America equity
. International Equity
. UK Equity
. European Equity
. Global Equity

I understand the risk position being 100% invested in Equity's but have 15 years before retirement and would like to accelerate growth over the next 5 years and at 55 then reduce my risk levels.


What percentage of the £170,000 would you put into each fund or would you put 20% in each fund and spread the total evenly?

Thanks

Duroo.


Answered by Boring Money

Hi Duncan,

Thanks for your question.

Firstly, without knowing you or your situation, I cannot comment on whether this approach is suitable for you, especially in regard to your personal risk tolerance. Looking at the bigger picture there are a number of things to consider when putting together a suitable investment strategy:

- When do you want to retire, would you actually like to retire earlier than 65?
- What level of return do you actually need to achieve your ideal lifestyle in retirement, can you take less risk and still meet your objectives?
- What is your risk tolerance, are you comfortable with big swings in the value of your retirement funds?
- What is your capacity for loss, do you have other assets to support you in the future or are you wholly reliant on this pension?

These are some of the questions that a qualified financial planner will help you to answer, and then recommend a suitable investment strategy as a result of the process. I would strongly recommend that you do consider reaching out to a financial planner to help you on your journey.

To add some general thoughts to the investment strategy you have mentioned, as you may know, equities are one of the most volatile asset classes meaning they fluctuate in value more significantly than other assets such as bonds / fixed interest. Although you are not planning on accessing your funds for some time, take some time to review the performance history and volatility of the funds to ensure you can personally stomach some of the potential ups and downs. You should be able to access this data from the individual fund factsheets, and Aegon will likely update these regularly.

Diversifying is also an important part of building a portfolio, and it does seem that you have some geographical diversification with the funds listed. Do bear in mind, however, that there is likely to be some overlap in regions particularly in the International and Global funds, most likely towards North America. Again, you should be able to see the geographical allocation of these funds via the fund fact sheets. At present, you are solely exposed to one asset class (equities) meaning that typically the returns of each fund will be strongly correlated, meaning that they will move up and down together. In times when equity markets are strong, you will likely see a significant uplift from all the funds, but in the event of an equity downturn, the opposite will likely be true. Typically when building a portfolio it is good to have exposure to a number of different asset classes, ideally those that are non-correlated or negatively correlated to hopefully provide a return or limit losses no matter the market conditions.

I hope this answer has been helpful, and please don't hesitate to contact me should you require anything further.

Kind Regards,
Simon
simonwarne@newworldfg.com

Answered by

Boring Money