D
Dynamo
Guest
Sea Pigeon has raised this issue in his response to Brendan's Guide, and at the risk of boring AAM contributors further, I wanted to re-open an issue from an earlier thread (my interest was the vogue for Focus 15, and apparent blindness to its riskiness, which I'll now attribute to "the Cult of the Equity").
My starting point is that I accept that equities have historically given the highest returns. I also accept that it is probable they will so over any long-term timeframe. (I won't get into the hoary old how long is long-term problem.) But I still believe that for the typical investor, an equity-only fund is too risky. I would recommend a balanced fund (either active or passive, depending on preference) for most investors. The ability to sleep easily at night cannot be overlooked, and most investors, in my experience, are prepared to sacrifice a small element of returns to get it. Indeed, with-profit investors, of whom there are many (including Brendan himself), are prepared to sacrifice quite a bit to get it. This is NOT sub-optimal if sleeping at night is part of what motivates you.
I got, as Mithrandir has put it elsewhere, eaten without salt by some posters for this view. So I asked the brokers and advisors who contribute to AAM for their analysis of the typical investor, and his/her tolerance for risk. I also asked, as some vindication of this view, what proportion of defined contribution pension investors who have access to an equity-only fund actually choose it.
The thread moved on and my questions got lost (or maybe they interest no-one but me !). So, prompted by Sea Pigeon, I'll re-open it. What are other contributors' views on "the Cult of the Equity" ?
My starting point is that I accept that equities have historically given the highest returns. I also accept that it is probable they will so over any long-term timeframe. (I won't get into the hoary old how long is long-term problem.) But I still believe that for the typical investor, an equity-only fund is too risky. I would recommend a balanced fund (either active or passive, depending on preference) for most investors. The ability to sleep easily at night cannot be overlooked, and most investors, in my experience, are prepared to sacrifice a small element of returns to get it. Indeed, with-profit investors, of whom there are many (including Brendan himself), are prepared to sacrifice quite a bit to get it. This is NOT sub-optimal if sleeping at night is part of what motivates you.
I got, as Mithrandir has put it elsewhere, eaten without salt by some posters for this view. So I asked the brokers and advisors who contribute to AAM for their analysis of the typical investor, and his/her tolerance for risk. I also asked, as some vindication of this view, what proportion of defined contribution pension investors who have access to an equity-only fund actually choose it.
The thread moved on and my questions got lost (or maybe they interest no-one but me !). So, prompted by Sea Pigeon, I'll re-open it. What are other contributors' views on "the Cult of the Equity" ?