How do you decide on the allocation of money?

[JoJoSM2]

We're just wondering what to do with our money going forward. How do you decide what percentage to keep in things like your main home or different more and less liquid investments?

[nannynick]

Generally once you are at a point of investing your home mortgage is paid off within 7 to 10 years. You would not put all available money into your home but you also would not put all into more liquid investments. You do some of both.

No set percentages but if you wanted something to follow then DaveRamsey uses 15% of income in his plan for the amount going towards retirement investments.

[Whatthefoxgoingon]

Always in this hierarchy:

1. Pension
   
2. ISA
   
3. Stock market
   
4. Property (currently not buying any more)

[Whatthefoxgoingon]

Forgot to say, we don’t have a mortgage or that would be number one.

[JoJoSM2]

We do max out pensions and ISAs every year and overpay the mortgage. However, our funds outperform the low interest on the mortgage so strictly financially speaking we’re better off not paying of the mortgage.
Now got stuck. I feel done with residential property investments as I find them stressful and not very good financially but DH is quite keen to get more property...
I wish someone could just tell me what to do!

[nannynick]

Would you borrow £1million at 3% and use it to invest in the stock market which may be getting you 7-12% return?

Not paying more towards the mortgage is similar to doing that... the low mortgage interest rate means you feel the money is better going towards stocks than the mortgage.

What is not factored in is the risk. When you increase the figure to say £1million then you feel the risk.

[nannynick]

You have maxed out pension and ISA. So now get rid of the mortgage on your home.
You are already putting a lot into the stock market via pension and ISA.

[Whatthefoxgoingon]

I’m with nannynick. I wouldn’t keep a mortgage going.

[JoJoSM2]

Would you borrow £1million at 3% and use it to invest in the stock market which may be getting you 7-12% return?

These days I'm risk averse and feel we've got enough so wouldn't entertain the idea.

Our mortgage term will finish next summer. Thinking about it, it might be worth paying the mortgage off for the feel good factor.

[rowrow1992]

@JoJoSM2 i'd use Multiply AI (iOS app) it's free and it helps you work out how to divvy up money across pension/ivnestment/savings etc. It's built by advisors :)

[Yeahyeahyeahyeeeeah]

Most people have far too large a proportion of their assets in property. I want about 2 x my home value in investment assets. The wrapper varies: pension, ISA, GIA, SPIB, offshore.

[JoJoSM2]

@Yeahyeahyeahyeeeeah that's what I have been thinking. Feeling quite reluctant to end up with most in property. Currently also stressing about Brexit and my own ignorance about it and the impact on our finances.

@rowrow1992 I've just had a little look at the app. Looks quite cool although I'm not quite sure it'll help our situation. However, it made me think we probably need to sit down and get a lot clearer on our financial goals as we seem to just be ticking over.

[Yeahyeahyeahyeeeeah]

@JoJoSM2 Brexit will hurt the most on money that you want to use outside the UK - travel, imports etc. However the upside is that those with assets invested outside the UK benefit. My investments are held in markets representing Global Cap, but retain a slight UK bias. I will therefore share in that upside as the grow. Volatility is expected, but only really a concern to those accessing assets to either generate income (sequencing risk), or switching asset class.

Inflation means equities continue to be a good investment. Ensuring the vehicle adds variety (Bonds and GIA, for money beyond pension and ISA) and the asset allocation is not too heavy towards one class is sensible. Inflation is a silent killer.

Property, once ones home is taken into account, is another asset class. One that seems to be disproportionately favoured in the UK. I think the biggest concern here is legislative change, and that doesn’t even cover, liquidity and taxation burden.

If you look at the long term returns on property they don’t exceed a global balanced portfolio - not something people tend to recognised. Most people gear up for property which does skew results. I gear up in the markets - mortgagee whilst investing (or used to be).

Debt is a consideration, but future returns and rates should be considered, not always current, but that’s a more complex and individual point.

[Yeahyeahyeahyeeeeah]

One other point and this is specific, regional. If Brexit unfolds badly for certain industries: financial services, law, IT, property prices regionally will suffer. Although at the very top end the US firms are now coming back, people don’t buy on a 3 year expat deal. I fear that prices in our area will fall longer term.

Property to me has had its day as a (for a time) outperforming asset class. Sure, make it a business, but I don’t like a big chunk as an investment unless there are A LOT of others.

[JoJoSM2]

@Yeahyeahyeahyeeeeah Thank you! I think I've diversified our financial portfolio well and Brexit should have too dramatic an impact on it. I think I'll be a bit more stubborn and veto any more residential property. Legislative changes are a massive concern depending on what happens in the next election. Luckily not to bad tax wise for us as I'm a SAHM.