Should you change asset allocation?
How much do I have to draw down this year ?
Book launch !
Arch Capital Update – Friday, 13 November 2020
Asset allocations, income levels and a book launch
Hi and welcome to today’s Arch capital update.
It’s been a big few weeks in the world recently with the US election, the result being fairly certain now, and now this week some big news around the vaccine. It seems that people are more optimistic than they have been in a long time, and this is being reflected in market prices with global markets performing quite well on all the news of stability and some hope around the virus.
It raises the question around our asset allocations and how much we should have in cash/bonds, the safer investments, verses how much should be in the growth, being shares and property. As soon as we start moving money from the cash and bonds into the growth component, we know we need to take a long time horizon. It’s tempting when interest rates are low and cash rates are next to nil to move more and more money out of cash and bonds into shares. Everyone is different and our role is to make sure your mix suits you, but we also need to keep in mind that we don’t know what is around the corner.
You always need an amount in the portfolio that is in cash and bonds to protect you, give you liquidity so you can access capital when you need it or if there is a major event. Now hopefully we don’t have a major event like this next year, but we can’t just shift our money from defensive into growth. Whilst we know the returns in growth are going to be better, we need some safety. So it’s all about you, and how we tailor that to your specific circumstances. But certainly right now it is a very common question on whether these asset allocations should be changing.
Another common question at the moment is around how much people in superannuation/pension accounts need to take out. This financial year it has been halved again due to the corona virus, so it is currently half the normal amount. So, if you normally had to take out 4% of your balance, you would only have to take out 2%. If you normally had to take out 5% of your balance, you would only have to take out 2.5%. You may need more than that, but this adjusted minimum is still in place for this year.
Last but not least, I often suggest a good book to read. I have actually written my own book called “The Super Secret” and it will be published in the next few weeks. I look forward to sharing it with you, there will be a book launch down in the Northern Beaches and in the City. It has certainly been good fun writing it and I hope it adds a lot of value. I will be sharing this with you as soon as I get a release date.
Have a great weekend.