Building a Diversified Savings & Investment Portfolio

Premium Bonds!  What exactly do you expect to earn out of them?

My FSA reckons you should have enough cash to survive a year without a job.  I'm not sure if this is right, but that is his view.

I'd keep P2P at between 5 and 10% of by capital (ignoring houses) but closer to the 5%.

alanp @bobo 5% in p2p ??  Really wow that is low, would hardly make it worth my time bothering.  I understand it is an untried and non stress tested arena compared to S&S but I try to minimise the impact of any unknowns by holding a comparatively low amount circa 2/3% on any one platform.

I'd be interested in moving into the BTL market but again through a platform such as Property Partner/Moose in place of some P2P

@bobo as for premium bonds, I simply figured if I need to retain a proportion as cash/emergency fund which will earn next to nothing compared to my other investments anyway, then I may as well have a bit of a punt with it where the capital is at least protected!

alanp I'm really thinking about growing my invesment portfolio between now and retirement with thoughts towards doing that at an early age (or at least wind down) from the income and then in turn providing a lump for my children as long as my work pension is still around to keep me going in my later years!  So long term growth I suppose is the answer, I'm not risk averse in terms of maximising growth but as I've said am keen to diversify widely to avoid any disasters if possible.

pom cheers for the input, we sound of similar(ish) thoughts, my 1/3 in cash isn't so much a few months survival cash and more just a need to keep some under FSCA protection but I'm willing to look at this is further opportunities present themselves

For what its worth I am currently 37% in equities, 27% in P2P and 33% in buy to lets.   This includes borrowings against some of my properties to invest more in P2P.

3% of my portfolio is currently in cash.  

I only think you should hold cash for four reasons.  1) as money to live on, 2) in case a good opportunity arises, 3) in case you are going to buy something (like a property, car or holiday) or 4) you think other asset prices are over valued and are expecting a correction.

If you have capital you don't need for a while it's best to have it invested and earning a return.  Over my life the people that have become rich are those that have invested (be that in property or the stock market or a business) over a long period of time and those that have remained (relatively) poor are those that haven't invested and have kept their savings in cash, eroding value over time (usually because they say they don't understand it or don't want to take any risk).

FSCA protection - I really think that's a bit of a red herring.  If you have a well diversified portfolio (I appreciate I have an aggressive portfolio but that is my decision as right now I think equities have a lot of upside and bonds are rich) and can afford to stay invested over a period of time then you will make a return.  

The worlds wealth is not going to drop to zero overnight.  Be invested in productive assets.  Cash is unproductive, it loses value over time - a good quality, well run business will generate wealth and earn you a decent return.

It's all relative though isn't it. 3% of how much is the question. For someone who has say £10k available for investment, a mortgage & family and is the only earner keeping 3% in cash would not be sensible as the car might break next week, or the boiler or something.


Even at a £100k it doesn't make sense to me, but at a £1m then it makes a lot more sense (assuming that covers your main outgoings for a few months)

I don't make much more than 10% interest (after defaults) on P2P which frankly is border-line worth it (there are so many better deals about), but it fills a hole in the income part of my tax, virtually everything else is capital or inside ISA/SIPP protection.  So really just getting in the numbers and taking advantage of the tax freedom and of course adding to my charitable giving.

2 to 3% per portal would drive me nuts.  I have portals that are dying, and growing portals.  (so 4 growers and 3 cashing out) , I hope to get back to 5, but the loans I have with the dying portals are still good rates so, I just have to wait.  Out of my total in P2P I try to keep below 2% in any one loan but may drift up to 3%.  I also aim to keep straight property below 40%, which is tough.

look at low standard deviation (low deviation ensures that timing is less of an issue) funds using a tool like trustnet.  Someone like Fundsmith is the cherry on the cake, but to get diversity there are many funds giving year on year better than P2P, and you get to take the tax as capital gain rather than income, finally park it in a portal that does not rip you off with excess management fees.  Really the days of 1% management fees to manage a secure website are long gone (unless you are FC).  Diversification, still required so you need a mix of economic areas and industry sectors, but let the standard deviation be your guide.

Risks; tinkering with your assets!  Limit yourself to only look at them every 3 months or so.  A bit like gardening and very different from P2P which requires a lot of time, Funds require a whole day's research every 3 months or so.