I Was 100% in a Global Index Fund Until I Realised This

ELI5 / TLDR

Ramin Nakisa from Pension Craft spent years preaching 100% global equities. Then he hit his “number” — the point where he has enough to live on for life — and quietly cut his equity exposure to 60%, putting the other 40% in a boring money market fund. The reason isn’t a market call. It’s that he no longer needs the extra return, and stomaching the inevitable 40% crash that comes with all-equity stopped feeling worth it. The interesting wrinkle: he deliberately avoided long-duration bonds because he thinks inflation spikes — the one thing that makes bonds and stocks crash together — are becoming more common.

The Full Story

The case for 100% equities (which he still believes)

Nakisa’s old position was the standard low-cost index gospel, and he hasn’t disavowed the logic. Equities return roughly 5-6% above inflation over the very long run — he cites the Dimson, Marsh & Staunton dataset covering 120 years. If your horizon is long and you don’t need the money soon, you take the extra return and you keep it simple. One global fund, one button.

The simplicity argument is behavioural, not mathematical. A complicated portfolio invites tinkering, and tinkering is where retail investors bleed.

Every time I’ve ever tried to experiment or have a portfolio that does something a little bit different, I always tinker with it, to my own detriment.

He also makes a quietly important point about diversification math: a global market-cap index is already enormously concentrated. Build a portfolio of just the ten biggest companies and plot it against the MSCI world — it tracks closely, because the top names are most of the index. The much-discussed “concentration risk” in global trackers isn’t a bug you can easily diversify away by buying the index; it’s baked in, a consequence of the US market having run so hard.

Why he changed his mind

The trigger was not the market. It was reaching his number. He frames allocation around three questions:

Risk appetite — how does a loss make you feel?
Risk capacity — can you economically survive the loss without it changing your life?
Investment horizon — how long until you need the money?

His horizon was still long. His capacity was fine (Pension Craft throws off income). What changed was purely appetite. Once he had enough, the 100% equity ride simply stopped sitting comfortably.

I know how equity works. There are periods of incredibly good returns, but then you get these 40% peak-to-trough falls. That’s inevitable… I just didn’t want to live with it. And I knew it was coming at some point.

The deeper point is that the portfolio is a means, not the goal. Once the goal (a lifestyle he can fund for life) is locked, taking risk you don’t need is just risk. He had also reached the number partly by luck — a big equity rally hit right after he went all-in — and that good fortune made it easier to bank the win.

The “human capital as a bond” idea

There’s a nice framing about why he could afford to be aggressive earlier. His business income behaves like a stable bond — “a perpetual bond or a kind of annuity.” When your human capital is bond-like and reliable, you can hold more equities in your financial portfolio, because the two halves balance. When he left the investment bank with no income, he was cautious and bond-heavy. As Pension Craft’s income grew and stabilised, he could afford full equity. Now that he’s hit his number, he comes back down the equity glide path — not because the income will stop, but because he no longer needs the upside.

Why a money market fund, not “real” bonds

This is the most substantive part. Nakisa didn’t reach for a long-duration gilt fund. He went to a money market fund — essentially very short-term, very safe instruments earning roughly the overnight rate (SONIA, near the bank rate).

Two reasons:

Duration risk. Long-dated bonds behave like a separate, volatile asset class. He nicknames the 2073-maturity gilt (TR73) “old man’s crypto” — in 2022-23 long gilts fell ~80% as rates spiked. He didn’t want to bet on the direction of yields, so he sidestepped duration entirely. Short-term instruments barely move when rates change.

The inflation worry — the real argument of the video. Normally bonds hedge equities: bad economic news is good for bonds, bad for stocks, and vice versa. But that hedge breaks in one specific regime — an inflation spike.

Inflation is like the mortal enemy of bonds because you’ve got a fixed income and inflation gobbles away a little bit of it every year. Equity, inflation above 5% usually means that equity de-rates — the price-to-earnings multiples fall. So both fall together if you get inflation spikes.

And his thesis is that these supply-driven inflation shocks are getting more frequent: COVID’s switch-off/switch-on of the global economy, US tariffs, the Strait of Hormuz being threatened. If supply shocks are the new normal, the negative stock-bond correlation people rely on for diversification is unreliable exactly when you need it. Hence: short, boring, low-duration cash-like exposure, where you’re not also exposed to that broken hedge.

Inflation-linked bonds and the break-even trap

He did buy some linkers (inflation-linked gilts), but flags the catch most people miss: linkers bake in an expected inflation rate, the “break-even.” You only win versus a normal bond if realised inflation comes in above that break-even. He bought near the tail end of the high-inflation period, expected stickiness, was wrong, and made ~6% instead of the ~7% he’d hoped.

Inflation-linked bonds protect you against unexpected inflation. Normal government bonds protect you against inflation that’s expected.

Equities, he adds, are the best long-run inflation hedge because businesses have pricing power — but only up to about 5-6% inflation, beyond which they de-rate too. Above that level, there’s nowhere conventional to hide; you’d need the actual source (oil, metals — i.e. commodities), which you can’t buy after the shock has happened.

Rebalancing, and the rate environment that makes it worth it

The 60/40 split gives him the “rebalancing benefit” pure equity can’t — when stocks crash, he buys them cheap with bond money. He’s clear-eyed that rebalancing’s excess return is real but small, depends on holding genuinely uncorrelated assets (cash/commodities work; high-yield credit doesn’t, it falls with equities), and shouldn’t be done often — once a year, or after a big crash, because trading costs and FX fees eat the benefit. “Give it a couple weeks, see what happens.”

The whole bond side only became attractive because rates normalised. In the zero-rate era, holding cash meant a guaranteed negative real return — there was no reward for safety. Now short rates of ~4-5% (the UK has unusually high short rates versus, say, the Eurozone’s ~2%) mean you’re paid a real income to wait.

Rules of thumb take a beating

The “100 minus your age” rule gets dismantled. It “sells books” but doesn’t survive contact with reality — why would a newborn be 99% equities and a 20-year-old need 20% bonds? Allocation should track risk appetite and capacity, not a birthday. A nervous 20-year-old might genuinely be better at 50% equity if the alternative is panic-selling the first 40% crash — the worst thing you can do.

He flags two more advanced ideas worth knowing:

Sequencing risk — the danger of having to sell assets right after they’ve crashed, early in retirement. If you withdraw a fixed £40k from a portfolio that’s just halved, you’re draining a far larger percentage and depleting it fast. The defence is holding non-crashy assets (cash, short gilts) to live on while equities recover.
The reverse glide path — counterintuitively, start retirement low on equities (say 20%) to dodge sequencing risk in the fragile early years, then increase equity as you age. Back-tests support it, because a 30-40 year retirement is itself a long investment horizon.

The honest emotional admissions

For all the stoicism, two confessions stand out. First, he tried a leveraged 3x long-Nvidia/short-Tesla trade and was “a wreck,” checking it hourly — proof that even a quant ex-banker can’t fight his own temperament, which is the whole behavioural argument made personal. Second, when asked if de-risking would sting if markets doubled tomorrow: yes, some FOMO, but 60% of a doubling is still plenty when you’ve already won the game.

The conversation drifts at the end into bonds being criminally under-covered (“nobody understands them”), a tangent about the painter Turner running risk-free government-bond arbitrage in the 1800s, and genuine enthusiasm for coding with AI (“I feel like a god”). The host, notably, stays 100% equities throughout — at 38, still accumulating, no number hit yet.

Key Takeaways

The shift was triggered by reaching “enough,” not a market view. When the goal is funded, unneeded risk is just risk.
Allocation = appetite + capacity + horizon. Two people with identical net worth can correctly hold very different portfolios.
A global market-cap index is inherently concentrated. The top 10 names track the whole index closely; you can’t diversify that away by buying the index.
Stock-bond diversification breaks during inflation spikes (above ~5%), when both fall together — the one regime where 60/40 fails you.
Supply-shock inflation may be structurally more frequent (COVID, tariffs, oil chokepoints) — the core thesis behind choosing cash-like over long bonds.
Money market funds ≈ overnight rate, near-zero duration and credit risk. He chose them over gilts to avoid betting on the direction of yields.
Inflation-linked bonds only beat normal bonds if realised inflation exceeds the priced-in “break-even.” Linkers hedge unexpected inflation; normal bonds price in the expected.
Equities hedge inflation via pricing power — but only up to ~5-6%, after which they de-rate too. Beyond that, only the commodity source of the inflation helps.
Rebalancing’s edge is real but small, needs genuinely uncorrelated holdings, and should be infrequent (once a year) to avoid trading/FX costs.
Stable business/job income acts like a bond, letting you hold more equities elsewhere.
“100 minus your age” sells books but is arbitrary. Risk tolerance, not age, should drive the split.
Sequencing risk: selling after a crash early in drawdown depletes the pot far faster; hold non-crashy assets to bridge the recovery.
Reverse glide path: starting retirement low-equity and re-risking with age back-tests well, because retirement itself is a long horizon.

Claude’s Take

This is better than the clickbait title suggests, and crucially it is not a closet concentration-anxiety or home-bias pitch. There’s no “ditch the US, buy your home market” subtext. The reasoning is mostly clean lifecycle finance: he won the game, so he stopped taking risk he didn’t need. That’s textbook, but he explains the why (the appetite/capacity/horizon split, human capital as a bond) better than most.

The one genuinely fresh argument — the thing that earns the score — is the inflation-regime point. The claim that bond-equity diversification quietly stops working precisely during supply-shock inflation is real, well-established in the literature, and underappreciated by people who treat “60/40” as a permanent free lunch. His choice of a money market fund over duration follows logically from it: if you can’t trust bonds to hedge equities and you don’t want to bet on rates, the honest move is to hold cash-like instruments and stop pretending. That’s intellectually consistent.

Where I’d push back: the whole frame is deeply UK-specific (gilts, SONIA, ISAs, money market OEICs, “old man’s crypto” TR73). The asset-allocation principles travel; the instruments don’t. And “supply shocks are becoming more frequent” is asserted more than demonstrated — three recent examples is a vibe, not a trend. It may well be right, but it’s a forecast wearing the clothes of a fact.

The sponsor reads (Vanta, Xero) are baked into the transcript and add nothing. Knock off a point for the meandering final third — bee panic, Turner trivia, AI rhapsody — which is charming but not informative. Net: a solid, honest conversation with one real idea worth keeping. A 7.