Business & Investment

Take a View-20 Questions for Investors

Today’s post is a summary of the most important questions that every investor needs to answer on their own.

20 questions for investors

The average person is (for me) surprisingly low level Interest What do full-time investors / financial bloggers do every day?

  • But on the relatively rare occasions people express Interest, I usually say that the factor is psychology.

You need to know yourself and make sure your plans are in line with your temperament so that you stick to it.

  • He also says that everything you need to know about investing can be written on a piece of paper.

But last week I realized that I never really care about making the paper.

  • This article is my paper.

The “correct” answer is unique to each investor (and their psychology), so I decided to organize it as a series of questions.

  • I’ll give you some answers that suit me, but you’ll have to reply yourself.

So here are 20 questions for all investors:

  1. Time (1) – How much do you have??
    • It sounds uncomfortable, but you need to estimate the possible remaining lifespan.
    • ONS has statistics on this – apparently I have 25 more years.
  2. Time (2) – When do you want to Quit the job??
    • You need to know the duration of the “accumulation” (savings) phase.
    • Calculate the “decumulation” (expenditure / retirement) phase by subtracting it from the remaining lifespan.
  3. Money (1) – How long can you live now?
    • This should be something you should be able to resolve from your bank account.
    • Use £ 25Kpa to simplify the calculation.
    • The important point here is that the less you spend, the more investment you can make and the faster you can retire.
  4. Money (2) – How long can you live retirement??
    • Most people spend less when they retire.
    • PLSA has three levels for one person in the UK.
      • Minimum = £ 10.2Kpa
      • Medium = £ 20.2Kpa
      • Comfortable = £ 33Kpa
    • Use £ 25Kpa again.
  5. What do you think Safe withdrawal rate (SWR) And are you planning to leave a bequest?
    • This is exactly two questions, but they are closely related.
    • The 4% rule is well known, but the true failsafe withdrawal rate is virtually close to 3% (after inflation).
    • This allows you to calculate how much you need to retire. A 3% SWR means a pot of 33 times your income.
    • So my £ 25Kpa is just a £ 833K pot.
    • Adding the average UK home price of £ 256,000, the finish line will be £ 1.09 million.
    • If you qualify for a state pension (and are ready to wait until retirement until age 67), you can reduce £ 304K from that goal and return it to £ 785K.
    • Fortunately, this target contains a pot for making requests. If you want to use it yourself, you can increase the SWR and use the pot.
  6. what good It seems?
    • Another thing you can use SWR with is as a return target.
    • Real 3% is a credible return from a diversified portfolio (which is why it can be safely withdrawn from a retirement pot)
    • In recent bull markets (since 2009), recent returns have been much higher, but uncommon.
    • You can use SWR to calculate how long it will take to reach your retirement number.
    • Therefore, 3% plus inflation (eg 5% pa) is the first goal.
    • You also need to design your personal benchmarks based on high-level target assignments.
    • My own benchmarks include UK equities, international equities, real estate bonds and cash.
  7. At what level Danger Are you comfortable?
    • Investment risk is usually translated into price volatility. This isn’t exactly correct, but it’s actually useful.
    • People don’t like volatility, but unfortunately, the assets with the highest returns (stocks) have the highest volatility.
    • You can use the Sharpe Ratio (SR) to compare the rate of return and the volatility of those revenues. The higher it is, the better, but it is incredible if it is too high.
    • If SR is high Leverage (See below) To reach the required level of revenue.
    • Another useful measure of risk is maximum drawdown. The stock market falls by more than 35% on a regular basis.
  8. Do you want to save tax??
    • This should be easy to answer, so the real question is what to do.
    • The UK’s main shelters are their main homes, in addition to ISA and SIPP.
    • Then there is VCT and EIS, and finally spread betting (see below).
    • And never forget to maximize your workplace pension.
  9. Do you believe Passive Do you want to invest?
    • The first thing to note is that there is no such thing as passive investment-we all have a view.
    • “Passive investment” is actually a brand used by fans of market capitalization indexes.
    • This isn’t the best strategy, but it’s very popular at the moment because it fits well with market conditions over the last decade.
    • Even if you want to move to “passive”, you still have to decide which product to use – ETF, OEIC or Investment Trust (IT).
  10. If you believe in aggressive investment – ​​can you Beat the market yourself?
    • There are two options here-are you a good stock picker?
    • Or a good market timer? The key here is to anticipate a recession and find signals to avoid the resulting stock market crash.
  11. In either case, you have to check for yourself when understanding When do you sell
    • This is more important than when to buy.
    • One of the big debates here is whether to use stop loss (I do-sometimes).
  12. If you don’t believe in yourself, do you believe Star manager??
    • Terry Smith, Nick Train and Kathy Wood are current examples.
    • Neil Woodford and Bernie Madoff are (very different) warning stories from the past.
  13. The wider version of this question is How much help do you need??
    • If you’re not ready to do a full DIY, you can choose to use a robo-advisor (spoiler note: the price is too high and you generally use a very boring portfolio).
    • Or you may get a financial coach.
    • Another extreme lie is an independent financial adviser. These are very expensive and their strengths are sales, on-hand and regulation, not investment chops.
  14. If you think you can handle DIY investments, the big problem is Which assets do you think are uncorrelated???
    • Diversification is the only free lunch in an investment, which relies on uncorrelated returns.
    • At the top level Assets Class-Equities, Equity Substitution (Private Equity, Venture Capital, Real Estate, Commodities, Hedge Funds), Bonds, hook up alts (DB Pensions, infrastructure, royalties) and true alternatives (long volume, global macro, precious metals, crypto).
    • Some of these can be separated by region (UK, US, Europe, Japan, APAC, EM, China), or by counterparty (government and corporate bonds) or size (large, medium, small).
    • The number of assets required depends on the size of the portfolio and the size of the transaction.
    • UK transaction costs and holdings typically indicate transaction sizes between £ 2,000 and £ 10,000.
    • Therefore, the £ 100,000 portfolio supports 10 to 50 assets, depending on the number of assets that can be tracked.
  15. Other big questions Assets Allocation How much home bias do you want??
    • The UK accounts for only 5% of the world’s equity market, but research shows that moderate over-allocation to its own market (for example, in the range of 20% to 40%) rarely has a negative impact.
    • Previously targeted for a 25% allocation, the increased volatility of the pound / dollar since the UK’s vote to leave the EU means that the current allocation to UK equities is around 12.5%. I will.
    • I have a much larger exposure to Sterling (about 60%) because my unlisted portfolio is all in the UK.
    • You also need to be aware of “away bias”. The United States accounts for 55% of the global stock market, but I have equal weights across regions, so I have only about 14% of the US stock allocation.
  16. Do you believe Out performance factors??
    • According to academic research, there are several ways to outperform in the long run – Momentum, Small cap, value / dividend, low volume and quality.
    • Which do you believe in today, and how do you incorporate them into your portfolio?
    • Keep in mind that there is no academic support for growth, which is a winning strategy in recent years.
  17. How you Rebalance Your portfolio?
    • Most people use annual rebalancing (if any), but cash flow rebalancing is better. Most people add new money to the pot or take it out of the pot.
    • Another option is to use percentage triggers on assets that have grown off-step.
    • Remember not to sell off stocks when they are on a downtrend.
  18. What do you think Leverage??
    • Equities (and therefore diversified portfolios) are on the rise, so moderate Leverage You can increase your returns without adding too much risk.
    • Rarely use more than 2% Leverage, But I came across some investors who are using 10% or 15% well Leverage..
    • Spread betting is the easiest way to access Leverage, A bonus that can be shorted has been added (I bet that the price will go down).
    • Options are an alternative, but UK retail investors are less accessible than the US (via RobinHood and TastyTrade)
    • Thoughts Leverage Worry, but keep in mind that mortgages are a leveraged way to buy real estate.
  19. Can you bring me something Satellite portfolio??
    • These can reduce overall volatility and, in some cases, increase returns.
    • Candidates include trend following, theme sectors (ESG, biotechnology, technology), and cryptography.
  20. How to deal with Tail risk??
    • We mentioned this when we looked at market timing signals, but we can also see trend following and the use of option strategies.

It’s a lot-how did you get on?

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