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Yields on both corporate and government debt continue to languish near historic lows – and if they rise , I could be left nursing sizeable losses due to their inverse relationship with prices
Laith Khalaf , an analyst at AJ Bell . “ This means different things to different people , but if you are willing to accept the ups and downs along the way , I would suggest having 100 per cent in equities . “ Within that you could have an allocation to smaller companies and emerging markets as well .”
Backing equities The logic for allocating a large proportion ( if not all ) of the pot to shares relies on the assumption that they can deliver better returns than bonds and cash over time – even if
9.9 %
– average annual return of US market over 15 years this does mean riding the inevitable ups and downs along the way . Data from JP Morgan shows the largest equity market , the US , recorded an annualised return of 9.9 per cent over the 15 years to the end of December 2020 . By contrast , developed markets excluding the US delivered an annualised return of 5.4 per cent , while emerging markets were higher at 7 per cent . Importantly , even the lowest of these figures should allow me to comfortably meet my core objective of beating inflation over 16 years . Bonds , on the other hand , face a number of challenges . Yields on both corporate and government debt continue to languish near historic lows – and if they rise , I could be left nursing sizeable losses due to their inverse relationship with prices . This doesn ’ t feel like an attractive prospect . I plan to review asset allocation periodically and will consider where the best investment opportunities lie across asset classes over the years . As we get closer to the handover to Leah , I am likely to take some
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