Annual review of SS ISA

[kerry19834]

I currently have the following two funds for my SS ISA. iShares 100 UK Equity Index Fund and vanguard life strategey 60.

My FSE 100 seems to be fairly average in returns over the last year. but there is a lot o talk on forums about the life strategy 60 being a dead concept.

I took it out as it has less risk attached to it.

Any thoughts.

Obviously my invetsments are UK biased as I have about the same in each fund. UK fund I piled money in when it crashed the other year to take advantage of.

Total funds £20K

Thanks

'Risk' is a wooly concept. In this context it's typically used to mean 'volatility' - and the 60:40 strategy is indeed less volatile than higher proportions of equities. But 'risk' as most people understand it is wider than that, and covers risk of absolute loss, risk of real-terms loss, risk of portfolio failure, sequence of returns risk...

Higher proportions.of equities increase some of these risk and reduce others. The 60:40 stratgy isn't dead, and most models are still based on that as the default. But it's no longer seen as the universally optimum one - and a lot of people are willing to accept higher volatility as the price of higher (likely) returns. Whether it's right for you depends on your attitude, goals, and overall financial position.

The 60/40 is considered a balance portfolio in investment terms and kind of a default for people who are trying to balance risk with return.
The 40 part is in investment grade bonds which have been poor performers during the low interest rate era but are expected to do much better now as interest rates have normalised.
There currently is a lot of recency bias out there with people running 100% stock portfolios sometimes adding to the concentration with technology based funds that have performed well over the last decade, so far it has worked but values are stretched which imply lower future returns especially in the US. A high starting price indicates lower returns going forward, but prices can stay high and go higher in the short term.
As ever you have to balance how long you intended to invest for with your need and willingness to take risk, taking into account people generally overestimate there risk taking abilities. Having some bonds smooths the ride but in the very long term lowers returns

Thanks thsat makes sense having a mix and as I have said I have money in a FTSE fund so it is probably good having some bonds too.

The FTSE 100 is an equity index, no bonds, it will have a high correlation with global stocks.
It has had disappointing returns when compared to other markets for the last decade, maybe it might outperform going forwards know one can tell.
It's Worth pointing out that the life strategy fund has already got a U.K bias in the assets it holds and by owning a ftse100 tracker alongside you are doubling down on that bias, effectively betting the U.K will out perform the rest of the world.

The Uk has been very average in relation to other regions. It always seems to lag. If you have a long time horizon, worth looking at equities and getting some US and emerging market exposure.

whilst more volatile, US small cap stocks could be interesting over the next few years I read.

alternatively, you can’t go too far wrong with a low fee global equity tracker.