You can just skip ahead to the results if you find it hard going. As a trailer for the second question I will be using some relatively interesting results using bootstrapping to optimise portfolios. I am also going to assume that we have an annual risk threshold of 10%. This is about as risky as the FTSE 100 ETF returns over the last year (I will relax that assumption at the end). If you are risk averse, then this way of investing may be preferable as the investment is more stable. If you really don’t want to spend any more time on this exercise then feel free to scroll to the end where the actual portfolio is shown. Most other indices don’t go that far back but academic studies have shown that stocks or equities, returned high single digit to low double digit per annum, on average. But the average (both mean and median) of this group will be lower than the top 25% of the human group, but higher than the overall human average. As an individual there is also the advantage that you will feel less attachment if you aren’t holding individual stocks. There are several types you can chose from, like suction, pressure and robotic pool cleaners.

This can be done formally using something like Black litterman or shrinkage. Like the rude comments about fund managers above this might be a little harsh. This isn’t much. Step one is to run a ‘point estimate’ optimisation of the above just to see what it gives us. In ETF land when you see these listed you are usually buying into listed companies holding these assets. When builders purchase land for development, they evaluate it in the context of the property’s appeal in the eyes of the end users (i.e., home buyers or those leasing or purchasing office and retail space). At first young people feel much of hunger: they don’t have good jobs, well positions in society. His blog first caught my eye cause of the way he invests and the goal of achieving financial freedom. For the first question I am going to assume a particular kind of person is doing the questioning. I am going to assume that we can’t predict expected gross return. Of course this isn’t quite the same as assuming the same unknown gross return and subtracting known fees; but it is neater.

When I actually do in my optimisation I am going to assume that everything I have has the same net Sharpe ratio, i.e. the returns scale precisely to the realised volatility. I say point estimate because we are going to estimate a single covariance matrix of returns based on all the history we have. You just have to make it a point to put what you went over here into practice. This isn’t a question about which investment wrapper is best, but about which stuff you should put in your wrapper. I will ignore tax, so I don’t mind if you are holding this stuff in your ISA, self invested pension, in a plain old brokerage account or in share certificates stuffed under the nearest matress. • Broken paper tray: In many of the old models of copy machines, the paper trays were flimsy and broke easily. However this does simplify things immensely, and although there are models which do a reasonable job of forecasting returns they require some effort to implement. If you have a relatively small amount of money I would say there is no value in holding individual stocks.

I am going to assume that there is no skill in investment management, or at least that the price you pay for it isn’t worth it. I’m also going to ignore property. Property developments are still springing up all over the place and some of the quieter towns are increasing in size. But generally, the market goes up, which means your investments will become more valuable over time. All these more complex things also tend to be more expensive. The higher allocation to Asia and Europe reflects they are more diversifying; the US market has been too correlated to the UK but also to global bonds thanks to QE. It’s a buyer’s market. So people for whom this entire question might seem trivial might want to skip ahead to the fun bit. This is what people normally do when they do portfolio optimisation. Two questions we should ask; firstly am I comfortable with such an extreme portfolio based on only 12 months of data? The second gives us half our weight in equities, but about two thirds in portfolio risk terms. Personally I would be happy holding any of these portfolios for the given risk tolerance. For example you could move 1% of the Asia equity allocation to the UK so all the portfolios are 7% at least.

I will also assume you are a UK domiciled investor who wants to own assets listed on the London Stock Exchange only (though the funds might be listed in Ireland for example). For example IUKD from ishares costs 0.4% and VUKE (Vanguard) costs 0.1% (note I am measuring fees on ‘TER’ which isn’t perfect, but is simple). Disclosure: I have no connection with eithier firm, but I did partake of some iShares corporate hospitality several years ago. Also note that the ‘Bench1’ fund has an explicit GBP hedge; so won’t be as careless with cash exposure as I have been. This is because again the ETF’s mostly include listed property equity rather than ‘real’ property, and also because most investors already own a house which gives them property exposure. So, what is it that draws these investors for investing in commercial property and what are its benefits? For decades savers and investors found it safe to keep their money parked with their banks however the current near zero rates of interest and volatility of the U.S. That period of time can range from months to decades. Most vans can carry around 1,500 and 3,000 pounds, and all this load sits behind the driver and passenger.