Dr. James, 0s:

Fans of the Dentists who Invest podcast. If you feel like there was one particular episode in the back catalogue in the anthology of Dentists who Invest podcast episodes that really, really really was massively valuable to you, feel free to share that with a fellow dental colleague who's in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world to me. What that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome, Welcome to the Dentists who Invest podcast. Hey team, welcome back to the Dentists Invest podcast with familiar face, Jon Doyle, IFA. We're here today to build on the podcast that we've been putting out recently and talk about asset allocation, which is super fun and super important. Jon, how are you?

Jon, 57s:

I'm very good. Thanks, mate, very good.

Dr. James, 59s:

Deja vu, isn't it?

Jon, 1m 1s:

It is a bit deja vu, although I've changed changed location.

Dr. James, 1m 4s:

I'm at home today rather than the office uh got, you got, it got, it got it got it, it looks a bit the sun is shining.

Jon, 1m 11s:

Today it's flipping lovely which is that's also changed.

Dr. James, 1m 14s:

That is also changing yeah, yeah, lovely stuff.

Jon, 1m 17s:

It's the one day of the year we get sun in the north of england and it was a friday this year.

Dr. James, 1m 22s:

There we go, anyway, Jon. Asset allocation let's hit the ground running. What the heck is asset allocation? Okay so asset allocation.

Jon, 1m 30s:

Last week we talked about diversification being the big rule in investments and managing risk in investments. Asset allocation is like the blend that we put together of all the different options of investments we might have. So the classic ones we think of are stocks or equities so owning companies and bonds, which is where we're lending money to a company or a government. But there's lots of other different asset classes that people think about. You know, classic ones will be property, both and buy to let real estate um, residential that's the word I'm looking for on friday afternoon. Uh. You've then also got things like commodities, gold and and uh investments in wheat and in in grains, and then you get alternatives as well that can get thrown out there. There's investments in airplane leasing or in weather-based funds that trade off reinsurance All sorts of weird and wonderful things people try to throw in there in the name of asset allocation.

Dr. James, 2m 37s:

Yeah, well, I was going to say, you know, even that's news to me about the weather, one, by the way, that's interesting. But even before I learned of that, you know, know, within the last minute, it's obviously this huge subject and you could probably write a flipping book on it, yeah, so I suppose it might be helpful to have some focus today and state from the outset then, when we talk about asset allocations throughout the the duration of this podcast, what we're really really referring to are traditional assets. I suppose you could call them, or paper assets, what would be your label for those? Because I would call traditional assets stocks and bonds, I would call it that, and then anything outside of that is non-traditional, I suppose, right, even though that it's not that they're new or anything traditional in the sense that they're most used in financial planning and they're the thing that is most recommended by ifas whenever they have that conversation with their clients so if you came to to and looked at like a juniper portfolio, you're going to see stocks, you're going to see bonds and you you also will see some commercial property, okay, ok.

Jon, 3m 44s:

So things like warehousing and offices and that sort of thing because they're very traditional assets, they're very well researched. We've got a lot of data on how they perform in certain circumstances Very liquid, very tradable. So they're very reliable in how they're going to behave. So they're very reliable in how they're going to behave. When you look at sort of the alternatives and other sort of things, there's a little bit more questionable as to the value they bring to a portfolio.

Dr. James, 4m 19s:

I think sometimes they're just putting there to make it sound sexy. Yeah, I wouldn't be surprised. Yeah, well, there's different labels for different categories of assets. But yeah, I suppose, for clarity, today, what we're focusing on are stocks and bonds. Right, primarily, we will just talk stocks and bonds, absolutely. Yeah, lovely stuff. Okay, let's go one tier down. We've talked about asset allocation. Now we're focusing on stocks and bonds. Now we're focusing on stocks and bonds. Naturally, part of the decision process in deciding how you allocate your wealth within a portfolio is related to how much exposure that you want to volatility, for example, how much you want your assets to appreciate with time, or indeed just not be, in which instance you might go for bonds, right? So what is that? Maybe decision making process when you're thinking to yourself okay, I've decided that I'm going to focus on stocks and bonds, now I'm deciding how do I allocate?

Jon, 5m 20s:

my wealth into that portfolio. So you would typically think about the amount of risk you're willing to take the amount of risk you're financially able to take and then the amount of risk you need to take in order to achieve the outcomes you're looking for. When you're younger and you're building your assets, you need to take more risk, but you maybe can't afford to take more risk, and so we have to think carefully about this. And as you get older and you build your wealth, you maybe need to take less risk but can afford to take more risk. So it's a bit of a balancing act, and really the biggest driver that we have in the decision that we make with clients is about how we feel their behavior might be affected by volatility in the markets, because that's going to have the biggest effect on our success when it comes to investing is how we manage our emotions through market volatility. Okay, so if you're someone who freaks out when you see your £100,000 portfolio drop to £99,999, then we're going to have issues and we might dilute some of this down for you. If you're someone who really can live with it, you understand the process, you trust the process, you believe in the method of investing that you're looking at, then absolutely you'd look to dial the equities up and the most return you're going to get over a longer time horizon is with a 100% equity portfolio. We don't necessarily want to dive straight in there when we've not done anything else, I get it, I totally get it.

Dr. James, 7m 11s:

Okay, cool. And then let's go one level deeper, right? So let's say, okay, well, let's use the 100% equities portfolio as a benchmark out and out capital appreciation, right? So we've decided that we can stomach the volatility, or the inverted commas risk. We're equating volatility for risk for the purposes of this.

Jon, 7m 32s:

Yeah, there are other risks, but that's the one that is commonly used for this.

Dr. James, 7m 38s:

Yeah, indeed, indeed. So let's say, we can stomach the volatility. And, by the way, actually, just before we do this, you know 100% equities portfolio, right? S&p 500, 2007 to 2008, 50% of its value right, that was people's life savings, right? So you're watching your million not go down by $1, but literally half, okay, right, yeah, yeah, yeah. And here's the thing that's what you have to be prepared for as a 100 equities investor with a long time horizon. Right now, that sounds in theory that you can manage it. I'm sure people might hear that and be like, yeah, we can do it, right. But you know, whenever you're watching your portfolio, do that and you've got that sell button hanging right in front of you on your isa app okay, it's potentially a different story unless you understand the overall narrative and you trust the process, right. So that was just to give everybody a little bit of a flavor of how much that volatility can quite be. Yeah, but here's the thing, right, it all depends on perspective, because you might also say, oh, oh, everything's half price, fire, sale. But again, you have to understand financial markets to be able to perceive things like that.

Jon, 8m 51s:

Yeah, 100%. It's the journey. It's so easy to look at a graph and see the volatility and be like, oh yeah, that's not a problem, I completely understand volatility. And be like, oh yeah, that's not a problem, I completely understand. And then you can be two, two or three years into an investment process and still be where you were when you started. You know, regardless of what investments you've picked. Sometimes that's just the way markets are. They go sideways for a bit and you have to stick to the course. You have to to understand the process you've picked and believe and trust in the process and then know it's going to come out the other side. You know, as an advisor, I've been doing this sort of 15 years now and I've been through this process a few times In 2008-9, my first period as a financial planner, a financial advisor with clients, and so when you've been through it a few times, you know the rules of the road because you've rehearsed it, you've planned it, you've lived it several times and you're talking about it all day. But as a client or as an investor, it's a very, very different experience. You know this might be if you're a dentist who just sold their practice in 2008,. You pop it into the markets and then you've lost half your life's work. We're talking a very different feeling in that moment than maybe someone who's put a few quid into it just as they're getting started. So circumstance really matters and it's about emotions and all that kind of stuff.

Dr. James, 10m 27s:

Totally Okay. So that 100% equities portfolio how do we allocate our wealth into equities is basically what I'm is is the next level to that.

Jon, 10m 40s:

Okay, so, um, this guy called Harry Markovits won a Nobel Prize for his work on modern portfolio theory. In this it talks about having what's called a strategic asset allocation. So you look back over the course of history and you go to achieve the kind of volatility I'm comfortable with, so that the investment journey based on the last 20 or 30 years whatever your time period is, these are the asset classes I should have been in. And when we're talking equities, you're talking maybe US large cap, us small cap. You might be talking Asian equities, excluding Japan. You'll be talking about Japanese equities, UK equities, european equities and maybe then even some more obscure stock markets, you know, like in Brazil or not Russia, maybe today, but you know those sorts of markets traditionally have been pulled into these portfolios and you're allocating towards them. So you, for our clients, we tend to do this based on market cap, so the biggest allocation would be to the US, and then you sort of allocate your equity portions accordingly. Different portfolio managers, managers, different investment managers have a different take on it. Some would include what's called a home buyer, so they'd allocate more to the UK because we are UK investors. And so maybe you say, oh, we want to invest in sterling, so we'll have a UK exposure. But that piece of deciding where I want to invest my equities across these different markets would be the strategic asset allocation. Some portfolio managers and advisors believe, then, that they can make a prediction about what's going to come in the next two to three years and might then make a tactical decision or active decision in the asset allocation process. So we'll go short on the US and long on the UK because we think that's what's going to play out for the benefit over the next few years. And they might do that with an index fund, that with an index fund, so you can use these passive vehicles or index funds to make active decisions in your asset allocation. So that's kind of a little bit of a highlight into asset allocation. Typically, you might start with a global market cap approach. You'd start with, say, 60% in US equities, 4% in UK, etc. Etc. And then start to tweak it or dial it from there, depending on your approach and theory on it. Where do you stand on all of that? We very much. I used to use a lot of tactical asset allocation. You know, a previous firm I was at really believed in it as a process. But what we did. What I did was tracked the added value that these decisions were making and generally found that they weren't adding a lot of value but were adding cost to the portfolio, so it ended up pretty neutral. Even when they got it right, the additional cost probably wasn't worth it, and I think it's very, very difficult today to predict what's going to happen. We have global themes that you look and you go rise of china, the you know, demise of the dollar, ray dalio's work on that you go. Yeah, I can see that story happening, but I don't know when and if you can predict when you'll be a very rich man, um, and so what? What we tend to then do is look at a global market cap and have it on a systematic review so that, in a very processed and methodical way, we're reviewing this market cap and then we'll rebalance the portfolio accordingly as we as we move forward. Okay now I described asset allocation to clients in a bit like putting a slide under a microscope. We've started with stocks and bonds and how we might allocate. You can then. You know, most microscopes have three or four lenses on them, right? I mean, it's a long time since I was in a science lab, but you might spin it around and we look then at the asset allocation to countries. We look then at the asset allocation to countries. We can spin it around again and we can take, say, the US equity market and then you can look at different factors or different characteristics of companies within that market again. Ok, and so there's. There's a few different characteristics that may get looked at within a portfolio. One of the most common ones is large cap versus small cap. So we're talking there about the cap just means capitalization, like how much capital this company is worth. Large cap would be S&P 500. Small cap will be a lot of those companies that are not on there on the junior markets. They're still big companies. We're not talking about investing in mom-and-pop corner shop type stuff, as the Americans would call it. You know it's still very large companies. One of the best-known small caps in the UK would be like ASOS. It sits on the AIM market. It certainly did up until recently. I've not looked at ASOS for a while but from memory it sits on the AIM market and there's been quite a lot of research into what tends to outperform and so, for example, smaller companies have tended to outperform larger companies in most market cycles this last six years, not so because of the fangs and their sort of rise to prominence on the S&P, but typically we look back over 100 years of data. These smaller caps caps smaller companies have outperformed larger companies, and so as a portfolio manager, you might say, well, we've got our 60 percent of us equities. How are we going to allocate this now to smaller companies versus larger companies? And then also there'll be other factors, other factors such as quality. So is this a really highly profitable company or is it a growth company? Is it a company that just spits out cash or is it quite capital intensive? So that's the quality area. You've got momentum as well. Is this company on a a real drive somewhere? Are we seeing a share price, do certain things on on trading tables that you look at and charts that go right? This has really got some momentum to it, and so there's quite a few different factors that they'll um, that can be looked at. Now, some of these factors have an awful lot of academic research gone into them, but then there are other factors that sometimes people will look at that maybe don't have the same rigorous levels of academic research going into them, because you can um, you can almost make a story of any sort of data point and bring a story out of it and call it a factor companies beginning with F or with founders called Dave that's the thing, though right, because you, there's so many variables in there and it's easy just to pick one off them and say, oh well, that happened because of this, right?

Dr. James, 18m 48s:

Well, if you're so good at predicting stuff, tell us what will happen, right, rather than what has. Right, yeah, especially in markets, because you can't you can't predict this stuff. And to give you a quick anecdote on that, I was reading a book once, and the book was by a journalist and he commented on financial markets. Right, by a journalist, and he commented on financial markets right, and his boss used to come in and say, hey, the markets are down today. Why the heck has that happened? And he'd be like I don't know, they just are right. And he was like, well, you better find a reason then, because we need a headline, okay, yeah, we just make it up.

Jon, 19m 21s:

Yeah, and the reality is no one knows and I'll tell you what one fact have you heard of Jim Cramer? I've heard the name. Yes, he does a show on I think it's like CNBC or one of these sort of American things and he's a stock picker and he is notoriously bad at it. And if you watched last week tonight with John Oliver, he did a big montage of Kramer's bad calls. You know, one of the most famous ones is him telling everyone that Bear Stearns was a buy two weeks before they went bust. He did the same with Silicon Valley Bank. There was a great one with Facebook where he, at the peak of Facebook share price 12 months ago, he was calling it a buy. It's brilliant, they're geniuses. This meta thing. Calling it a buy it's brilliant, they're geniuses. This meta thing is is all what it's about the metaverse. And obviously then the share price tanked to the point where, two weeks after he recommended it as a sell, the share price inverted in its sense, been on a rally right and some guy created an et called the Inverse Kramer. So all it did is placed a trade opposite to whatever Jim Kramer picked and I think it's got a Twitter account and everything like the Inverse Kramer right, and it worked for a while. But it's now started to not work so well, because what happens is everyone plows money into the inverse kramer and suddenly it's. It twists the, the logic or the the theory behind that as a factor.

Dr. James, 20m 57s:

But for a while but I think, but here's my high level, here's the high level jim kramer play okay. Yeah, kramer is saying it's going to do one thing.

Jon, 21m 3s:

It's saying it's going to go up and he's flipping selling.

Dr. James, 21m 4s:

You know what it means. He's not buying. He's doing. Jim kramer is saying it's going to do one thing it's saying is going to go up and he's flipping selling. You know what it means. He's not buying. He's doing. Jim kramer is the real mastermind that's what's happening.

Jon, 21m 16s:

He's playing 4d chess when the rest of us are playing drafts. Yeah 100.

Dr. James, 21m 20s:

He is playing us at least, like that could be what's going on.

Jon, 21m 23s:

That could be plausible anyway, you never know, you never know. So you know different portfolio managers, different people will have different takes on the factors that are could be at play. But that's the kind of the, the next level of asset allocation we tend to focus on, on small cap, on growth, on quality, and then you might look at throwing something like momentum in there as well as a possibility. So you then allocate to these to try and produce a rounded portfolio. And I've described these factors to people as like taking that tin of heroes or quality street, and which one do you tend to get at Christmas heroes or quality street? And which one do you tend to get at Christmas heroes or quality street heroes? And what's always left at the end do you know what?

Dr. James, 22m 18s:

I always get heroes and flipping celebrations mixed up. What's left at the end of the heroes? The heroes are the Cadbury's ones.

Jon, 22m 24s:

All the celebrations, whichever one you're thinking of, I can't's ones, or the celebrations. Whichever one you're thinking of, I can't tell the difference between the two.

Dr. James, 22m 30s:

Yeah, the issue is I don't actually know which one's which, but anyway, I'm pretty sure heroes of the Cadbury's ones, in which case it's those caramel ones. They're always left, they're the ones that are left.

Jon, 22m 41s:

Yeah, they're horrible. I probably think celebration and it's always the bounty in our house.

Dr. James, 22m 50s:

Oh what? And it's always the bounty in our house.

Jon, 22m 52s:

oh what, yeah, they're the first to go. Oh yeah, okay, okay, that's great. But the one that in the uh tin of uh roses or quality streets, the toffee coin, right, no, no one goes eat those, right, exactly. And using these factors is like taking an approach to these sweets for chocolatiness and sweetness and crispiness and softness and you just end up all you're excluding is all the toffee coins at the end, right, because you're just getting rid of the ones that actually no one wanted in the first place. There are a lot of zombie companies that just move on. So by blending these factors together, you can kind of dice up the market and end up with a much better investment experience, tilt it in your advantage, and that's just one way of kind of taking, you know, stocks and bonds then into global asset allocation, where we're allocating around the world, and then on to the factors that might be at play within a portfolio.

Dr. James, 24m 2s:

Real quick, guys. I've put together a special report for dentists, entitled the seven costly and potentially disastrous mistakes that dentists make whenever it comes to their finances. Most of the time, dentists are going through these issues and they don't even necessarily realize that they're happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdentistoinvestcom. Forward slash podcast report or, alternatively, you can download it using the link in the description. This report details these seven most common issues. However, most importantly, it also shows you how to fix them. I'm really looking forward to hearing your thoughts. You know, the sign of an effective analogy is one that everyone can relate to and totally understands and that actually really works. But yeah, anyway I love analogies. It's like my favorite it's a really good one anyway. Stocks okay. So we've we've investigated stocks under a magnifying glass. What about if we want to do the same for bonds?

Jon, 25m 10s:

Yeah, again. So there's a few things with bonds. I've got some slides to my left if people are watching this on anything, because some of this stuff is so detailed I can't do it from memory, especially on a Friday morning. That's cool, but when it comes to bonds, there's a few things that really impact it. Again, you would make a decision about what a global asset allocation you're going to take with your bonds and also the allocation between company debt and government debt, because they have different characteristics. Okay. So, for example, with Juniper, we focus on UK debt because we don't want any credit risk the 90 credit risk, any currency risk in this part. Our view on bonds is it's there like the tonic in a gin and tonic. Sole job is just to take the kick out of your equities.

Dr. James, 26m 15s:

Nobody wants it on its own, apart from my 12 year old, who will drink tonic on her own oh see, see right that analogy right mightn't quite work because the gin is the fun part of the tonic.

Jon, 26m 26s:

John yeah, that's the equity oh right, oh sorry, oh sorry I I uh, yeah, yeah, I'm completely misunderstood no, no, no fun part. And the tonic just takes the kit off right, so you don't want to get drunk too quickly. So you have a bit of a tonic.

Dr. James, 26m 44s:

You might have a single instead of a double, or okay and but you have to have some fun, right, and therefore there usually is a little bit of gin in there right, because nobody drinks tonic on its own oh okay, I'm getting way too sucked into this. Sorry, I misunderstood, so I'm gonna check out off the gin and tonic analogy.

Jon, 27m 6s:

Don't worry about that, it's fine, it's fine. So, anyway, you can look at a global allocation. You might look at some US bonds If you're wanting higher yield on it. You might push into sort of high yield debt or some countries that have much higher yields on their bonds. There was a point in 2013, I think, when the yield on a greek bond reached 110, because nobody believed that they would be there in 12 months to pay back that debt. Not the kind of play that I would go for, because I don't think our excitement should come in from, uh, from the bonds. But, um, so that's. That's. That first decision is what bonds do I want and and what countries are we going to go to for that? Okay, and this is where that decision of actually what part. What is the purpose of bonds in your portfolio? Are you looking for income? Are you someone who's investing in bonds to get natural income, to to pay for stuff, or are they a diluter to your big equity portfolio? And then, um, we have term, so the length of the bond, so you can get these long-dated bonds. Some governments have issued bonds that are like 100 years long and you get really short-dated, so you can buy bonds that are just in the last one to three years of their term, and that term is a really big, important part of the return of a bond. And then credit. So how credit worthy is the country or company that you're lending money to? The US? Very, very credit worthy? Argentina? Not so credit worthy got a bit of a history of defaulting on debt. Not so creditworthy got a bit of a history of defaulting on debt. And you know this will then play into the risk profile of the volatility you could expect and the returns that you'd expect from a bond portfolio. Give you an example all right now I'm going to use an analogy that's a bit visual but hopefully people can picture it in their mind. Is this this term and yield are like two ends of a seesaw Right and sorry. The capital value and the interest rate on a bond are like two ends of the seesaw, and term is like the distance you're sat from the fulcrum or from the middle of that seesaw. So if you've got a really long-dated bond, the capital value is going to go up and down quite significantly as the yield changes, because a £100 bond paying £4 a year is a 4% yield. But if everyone suddenly wants 8% for their bond. Your bond's now only worth 50 quid, and that's what happened when Liz Truss took over. Interest rates went from 0.5% to 3% or 4% and suddenly bond yields dropped significantly. But if you're short dated, if you're sitting really near to that middle of your bond with the term in the middle of the seesaw, you're not going to experience as much volatility because you know you're going to get your principal, your hundred quid, back. Yes, one to three years, that makes sense yeah, so it makes it makes a really big difference to your experience as an investor and this last 12 months. Bonds are supposed to be the tonic right. They're supposed to be the boring bit low volatility, take risk off the table, all that kind of stuff. But there's a whole swathe of investors over this last 12 months who've been sat in long-dated bonds some of them put there automatically by their pension funds or by their advisors who have been sitting on 30 40 losses because they were in long-dated bonds and it's been profit. Um. So bonds like the, the term, the credit worthiness really important things to think about with your bonds. And are you looking just for something to take risk off the table, in which case, like we do at juniper, we just stick to short-dated uk bonds or are we looking for something that's going to add a bit more spice in there and get some interest, some yield from our bonds and maybe even some currency risk by having japanese bonds or us bonds etc okay, cool.

Dr. James, 31m 58s:

So there's. There's a little bit pardon, sorry we got heavy there. It's good, because it's proper meaty stuff that is full of well. It's interesting, isn't it? We can dig our teeth into um so uh, when it comes to bonds, it's a little bit more calculated. Is it the decision to buy bonds versus, versus equities? There's a little bit more few more things you have to consider.

Jon, 32m 23s:

So a good way of putting it yeah, yeah, well, also like bonds, bonds can be a lot more scientific. They're very predictable because you know what your yield is and you know what your term is when you buy the thing. So they can be quite predictable and you can model what will happen in certain environments. So you really want to be buying bond funds that are going to do what you expect them to do If you want to be in bonds.

Dr. James, 32m 53s:

I like it. So, when it comes to, when it comes to, let's say, purchasing an ETF which will give us exposure to the global economy and which is some people's entire portfolio, if there are 100% equities, right, and that that's fine and on a level that works, when your time horizon is extremely long and you can handle the volatility, right. The second we start to put bonds in there because it's a more involved process. Let's say, people, people are thinking about divesting, okay, and they're getting to that realm where we're thinking okay, because traditionally the logic would be, if you're 10 years and tell me if you agree with this, right, but traditionally the logic would be, when you're outside of 10 years, of having to touch your principle as in your assets, right. Then the traditional logic would be that where volatility is not a consideration and emotional factor not a consideration, we're 100% equities, right, yeah. So as soon as we get within that 10 years and we're thinking, okay, divesting is on the horizon, okay, now what we need to do is smoothly, smoothly start to withdraw some of the value of this portfolio and turn it into cash. So we're going to use bonds as like a halfway house. So the second that we start to purchase bonds because there's a few more intricacies to it. Is that something that realistically a retail investor could do, or would you advise getting some help from a professional at that point?

Jon, 34m 36s:

I mean I'm a financial advisor. Most people, I think, would benefit from taking actual financial advice on these things. Yeah, I think interestingly, on like a total market cap fund, whether it's an ETA, you're still only getting although it's called a total market cap, you're still only going to get 35%, 40% of the global companies in something like that, because often they can still get enough tracking error of the global market without touching some of the smaller, more illiquid companies that they can't get involved in. They can't get involved in. So you can improve your output by taking a more siloed approach to investing in different markets. So it's a good starting place to be. But then there's more nuanced ways to go about doing it. But then when you're looking at bringing some risk off the table into bonds, you know there are ways to go about doing it as a DIY investor. But I think the bigger thing with this is the cost of mistakes. You know gets much bigger to recover from. Yeah, if you're in your 20s or 30s and you put 10 grand into a total market cap fund and it drops 50% and you've got 30, 40 years, whatever you know, to recover from that and it's only five grand you're coming into land at retirement, the cost of a mistake one you were going to be talking, hopefully more significant numbers you know, and, like your million pound example right at the beginning, you know, uh, we dropped 50 on apound portfolio. If you lost half your portfolio, how do you recover from that? It's very, very difficult. You don't have the same earning capacity. You know. Interestingly, time horizon probably hasn't changed too much, go, so that's really interesting. So that's really interesting and I think, um, obviously, as an, as an advisor, I'd suggest that everybody would gain value from, from talking to a professional advisor at any point through their journey. Um, because, uh, even a total market cap fund isn't going to capture the whole of the market. Um, they'll uh sort of actually say, like 40 percent of global companies and it does enough of a job to, to, to manage without a tracking error. Um, but certainly, as you're coming in towards retirement, um, things start to get real because the cost of a mistake and your ability to recover from a mistake becomes much harder. The cost is bigger and it becomes harder to recover. You know, if you're sort of 20, 25, 30 years old or whatever, and you lose 50% of your portfolio in global equities, or you know you're stuck in long-dated bonds. When Liz Trust took over and you lost 50, it's not a problem. You've got 30 years to recover and it probably was a relatively small amount of money in the scheme of your life's earnings. But if you're, you know, 55, 60 just sold your practice. You've got your lifetime of pension savings and stocks and shares, isa savings, and we're sitting on a seven-figure sum and we get it wrong. That's your year's worth of work gone and years that you don't have ahead of you to work and earn back that mistake. So it gets really important to manage that. And although you can go out and diy bond investment, I think the um process of really thinking through the risks you're willing to take not willing to take where you feel exposed, thinking about what you want to achieve over the next 20, 30, 40 years of your life that that's where the power of financial planning and advice will come in, because you can then slot your portfolio into this and take risks that are appropriate for what you're trying to achieve over the course of that. And I think that the old wisdom is now out of date on this. The old wisdom was that you would, you know, drastically reduce risk at 60 um and and maybe even buy an annuity. Right now annuities are dead. Even now that interest rates are high, I think the um interest, the the yield you'd get on annuities about three and a half percent on an index linked annuity is about 3.5% on an index-linked annuity. So why would you hand over 100 grand to get 3.5 grand a year? You're going to be 88 before you get your money back. So the wisdom is different, but also longevity is really starting to impact this. There's a really interesting stat. I use JP Morgan's's guide to markets quite a lot for for some of this research. It's a free um app on on you can get on iphone and ipad really useful to download. In their most recent slide they've got. They've got one on life expectancy in the uk. Okay, um, and if you're 65, I'm going to ask you to guess this right you're 65 and you're a man, what percentage chance do you think you've got of living to 80?

Dr. James, 40m 27s:

well, I mean, I'm actually roughly with, uh, average life expectancy figures. Uh, so that would be 82 for men, ish. So let's work off that, if it's roughly that. So if you've already made it to 65, your chances of making it to 82 would presumably be higher, because there, I'm sure, there's probably a lot of people who die from memory, there's a lot of people who die young and then people tend to survive and then they, you know, as life expectancy comes up, that death rate increases again. So the, the, the, I suppose, the thought, the answer. If that's the average, if 50% is the average, okay, then you'd say 50% would make it there, okay, right by there, okay, right by logic, but then it would be slightly higher because they're already 62 is my logic. So I'm gonna guess 55, 67 percent, oh, okay. Oh, my, the logic was there, though the logic was there.

Jon, 41m 28s:

Logic was there, though. For women it's 76. Okay, uh, but when, when you look at it for a couple, for one member of that couple to live to age 80, what do you think the percentage is?

Dr. James, 41m 42s:

One member of the couple to live to age 80? Yeah, and was there a qualifying factor there? Were they already 65? Yeah yeah. So I'm not even going to try to logic this one, I'm just going to pull an answer out of the air. I'm going to say 70. No, it's 92%. Oh, I'm not even going to try to logic this one, I'm just going to pull an answer out of the air. I'm going to say 70.

Jon, 42m 0s:

No, it's 92%. Oh okay, which is crazy. Now let's push this out to 90. All right, what percentage of men who are 65 will live to 90?

Dr. James, 42m 11s:

65 will live to 90. Well, it'll definitely be lower than whatever we said a minute ago 64, was it 90, I'm going. It'll definitely be lower than whatever we said a minute ago 64, was it, uh, 90? I'm gonna guess 43. No, it's 24 percent. Uh. 43 is a bit high really, isn't it? I should have thought about that yeah, yeah.

Jon, 42m 27s:

So one in one in four men who are 65 will live to the age of 90. What about women?

Dr. James, 42m 35s:

well, women live longer than men, so one in three uh, yeah, pretty close.

Jon, 42m 41s:

35, that's very good. Yeah, yeah, and a couple. Final one, a couple what percentage of a couple will have one person live to the age of 90?

Dr. James, 42m 52s:

so presumably it would be somewhere between one third and a quarter right. Think about what happened in the last one. Oh yeah, it went crazy high, didn't it? Okay, 55. 51%? Oh yeah, because of course it wouldn't be between them. It would be if you've got two people.

Jon, 43m 16s:

It's the weird way, the's just to do ahead. But if you think like 65 year old couple, most, most people uh, marry someone within sort of five years, let's say 60, 65 and, um, you're retiring. There's a 50, 50 chance one of you is going to live to 90. That's 25 years.

Dr. James, 43m 44s:

So why would you invest over the short term? And people are living longer. Yeah, people who listen to this podcast average age 25 to 35.

Jon, 43m 55s:

So the stats say, and what you also then will add into this is you know, I live in the Northwest Blackpool is just down the road, city center blackpool. Life expectancy is 55 for men no way because, because of it, has this whole thing of like a lot of a lot of people very difficult backgrounds went on holiday to blackpool in the 70s when they were kids. So you get a lot of drug addicts migrating there to live out their their days. So their life experience is atrocious. It's just right. But most of the people living to this, listening to this podcast, will be above average health, above average wealth, living in above average areas. They're above average people, so they're going to live typically longer than the average person. So it becomes really important that we don't de-risk too much in those early years but also we don't try and have this static income. So that's where, like, asset allocation becomes really important in the way we want to live our life through what could be a hundred years of living food for thought.

Dr. James, 45m 6s:

John, thank you so much for all your ways of the day coming up to the 40 ish minute mark. I like to keep things around about then. For conciseness, any words of wisdom?

Jon, 45m 16s:

just to round off uh, no, not, not at all. Um, if this has sparked anyone's interest, uh, you know, we've got some more stuff that we can uh send to people, so if you've got any questions or want to dive deeper into this, you can reach out to me. Uh, juniper john on instagram and twitter. Uh, at juniper wealth uk, I think, on most social media, and juniperwealthcouk is our website. So, yeah, just here to serve.

Dr. James, 45m 43s:

Top stuff. Thanks so much, John. Hope you have a lovely Friday and a lovely weekend. We'll speak to each other very soon.

Jon, 45m 48s:

Awesome mate, Catch you in a bit.

Dr. James, 45m 50s:

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