Share this page:
Stay connected:
Welcome to the Citywire Money Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error

Safe Investment
Coste
Posted: 12 May 2018 10:09:21(UTC)
#1

Joined: 12/05/2018(UTC)
Posts: 2

I have a variety of investments for my retirement in a few years.

I have investment trusts with SMT, Henderson European and Old Mutual, 3 DC schemes and a couple of DB schemes.

I want to transfer some of my investment trust money say £100k into a safe investment, so I can start to draw down once I reach 55.

I would like it to match inflation but don't want any of the capital to be at risk.

I would be grateful for any advice offered, thank you.
AJW
Posted: 16 May 2018 13:23:11(UTC)
#2

Joined: 15/06/2017(UTC)
Posts: 82

Thanks: 78 times
Was thanked: 56 time(s) in 38 post(s)
Ain't that the dream.

How many years until retirement? Look into NS&I bonds for capital guaranteed protection.
Tony Peterson
Posted: 16 May 2018 13:35:05(UTC)
#3

Joined: 10/08/2009(UTC)
Posts: 1,252

Thanks: 775 times
Was thanked: 1580 time(s) in 649 post(s)
You don't want your capital to be at risk???

But your life is at risk. All the time.

Why not have a little fun with the capital which you will one day lose one way or the other??

i speak as an octogenarian after his first surgery.
5 users thanked Tony Peterson for this post.
Keith Cobby on 16/05/2018(UTC), Captain Slugwash on 16/05/2018(UTC), Paul Easthope on 16/05/2018(UTC), antigricer on 16/05/2018(UTC), Jenki on 16/05/2018(UTC)
King Lodos
Posted: 16 May 2018 15:28:27(UTC)
#4

Joined: 05/01/2016(UTC)
Posts: 3,051

Thanks: 722 times
Was thanked: 4775 time(s) in 1852 post(s)
Coste;62177 wrote:
I would like it to match inflation but don't want any of the capital to be at risk.


I think right now it is NS&I Guaranteed Income or Growth Bonds over 3 years, at up to 1.95%, and they may offer inflation-linked products again at some point:

https://www.nsandi.com/our-products

You could buy US treasury bonds yielding over 3% now, but that would involve currency risk (unless you're likely to spend time or money in the US).

UK 10 year gov bonds are only yielding 1.5% at the moment .. At some point that should pick up.

And at such a point that 5-10 year UK government bonds were offering better rates than NS&I (both of which should be safer than money in the bank), you could start a 'Bond Ladder' .. We talk about how vulnerable bonds are from rate rises and inflation – but long-term, yields should tend to track inflation .. And if you buy in a 'ladder', holding each to maturity, your capital is safe, and your income is guaranteed .. You could use a Vanguard UK Gilt tracker fund, but it would at least feel more volatile, as you'd see the daily repricing, and you'd be in a perpetual ladder .. I prefer a ladder I can get out of by letting the bonds mature – if that makes sense
andy mac
Posted: 16 May 2018 15:29:05(UTC)
#5

Joined: 12/02/2016(UTC)
Posts: 219

Thanks: 131 times
Was thanked: 187 time(s) in 103 post(s)
no such thing as free advice on here
suggestion or observations yes
if you dont want the risk buy some premium bonds
King Lodos
Posted: 16 May 2018 15:36:42(UTC)
#6

Joined: 05/01/2016(UTC)
Posts: 3,051

Thanks: 722 times
Was thanked: 4775 time(s) in 1852 post(s)
Government bonds and NS&I bonds are about as safe as it gets .. Certainly safer than money in a bank.

Premium bonds I think offer an effective yield of 1.4% at the moment (they're also offered by NS&I) .. But it's less likely to track inflation (it's been a lot lower recently), and therefore wouldn't be as safe when it comes to preserving purchasing power
Catch The Pigeon
Posted: 16 May 2018 15:45:42(UTC)
#7

Joined: 09/12/2015(UTC)
Posts: 78

Thanks: 35 times
Was thanked: 116 time(s) in 36 post(s)
All investments have some form of risk.

The risk for Government bonds, NS&I bonds and Premium bonds is inflation risk. Are you going to get a real return on your money? Unlikely.
martin b.
Posted: 16 May 2018 16:31:31(UTC)
#8

Joined: 03/03/2014(UTC)
Posts: 14

Thanks: 8 times
Was thanked: 29 time(s) in 9 post(s)
Many of us will have asked the same question.

Really safe government stuff? The returns might not match inflation.
Absolute return funds? They have come in for a lot of stick and can lose money.

For what its worth I have taken an interest in a few ITs that recovered from the '08 crash within 2-3 years and which also have low volativity. You could look at these and hold cash back so when there is another crash you can top them up and hope that within a couple of years your investments have fully recovered. Examples might include WTAN, EWI, RCP or 3IN which also has a 4% yield. MYI also recovered quite quickly and has a 4% yield but it is more volatile.

Even your SMT stock recovered from the last crash within 3.5 years

There is also P2P as an ISA which is beating inflation.

I dont know where you live but in some parts of the country you could buy a flat for £100k and earn £300+/month from that.

Sure capital is at risk with all of these in the short term but if you take a 10 year view even if there is a crash you should be better off than if all your money was in a safe place earning 1.5%







King Lodos
Posted: 16 May 2018 17:09:36(UTC)
#9

Joined: 05/01/2016(UTC)
Posts: 3,051

Thanks: 722 times
Was thanked: 4775 time(s) in 1852 post(s)
You can see here – these are real returns – bonds in the 1940s were more expensive than today (just).

But returns kept pace with inflation reasonably, long-term, because the response to higher inflation is usually to raise rates .. And of course shorter duration bonds held up better, because you could keep buying issues at better yields .. So perhaps a ladder of 3-5 year bonds once/if they offer better value than NS&I.

P2P lending (RateSetter's the only one I still invest in) has been a good diversifier, with >5% yields and no lost capital so far .. But it's a bit of a concern when RateSetter itself is having to bail out bad loans .. If they can't make money, at some point that's going to be a problem .. I used to have 10% in P2P, now it's closer to 5%

https://www.wealthresearchgroup.com/wp-content/uploads/2017/10/image1-17.png
2 users thanked King Lodos for this post.
Robin Stone on 16/05/2018(UTC), martin b. on 16/05/2018(UTC)
Coste
Posted: 17 May 2018 20:07:43(UTC)
#10

Joined: 12/05/2018(UTC)
Posts: 2


Hi

thanks for the replies so far, I am 52 with most of my investments in equities of some type.

My DB deferred pensions don't start until I am 60 and 65.

I want to safeguard some of the money in my SIPP so I can look to retire if I wish at 55. I do have a flat that I purchased a few years ago with an overdraft from my offset mortgage which requires paying off in full this September, taking all my current savings.
Mr Helpful
Posted: 18 May 2018 09:52:31(UTC)
#11

Joined: 04/11/2016(UTC)
Posts: 680

Thanks: 765 times
Was thanked: 912 time(s) in 426 post(s)
Coste;62177 wrote:
I have a variety of investments for my retirement in a few years.
I want to transfer some of my investment trust money say £100k into a safe investment, so I can start to draw down once I reach 55.
I would like it to match inflation but don't want any of the capital to be at risk.

I am 52 with most of my investments in equities of some type.
My DB deferred pensions don't start until I am 60 and 65.
I want to safeguard some of the money in my SIPP so I can look to retire if I wish at 55. I do have a flat that I purchased a few years ago with an overdraft from my offset mortgage which requires paying off in full this September, taking all my current savings.

Unless put into Cash, capital as observed is always at risk.
Even Cash is subject to inflation risk.
Have put two posts together, to think about the dilemma.

Like the flat; a stable source of inflation linked (real or imputed) income.
Capital value will of course fluctuate but hopefully grow in the very long-term.

For the liquid assets, tradition has it that to achieve a 'well balanced porfolio'; Stocks are counter-balanced with Bonds (maybe Short Duration) and/or Cash. But with bond yields and interest rates on the floor, these do not match inflation, so become wasting assets steadily losing purchasing power. But this may be a price you are prepared to pay, as capital drawn down, for peace of mind?

Investors looking for a counter-balance offering a +ve real yield, have turned increasingly to 'Alternatives' as defensive instruments, including :-
+ Commercial Property
+ Renewables
+ Infrastructure

Unfortunately they are not guaranteed low volatility (one dubious definition of risk), but they are less than perfectly correlated with the main Stock Indices, which makes them interesting from a portfoliio construction perspective; but doesn't really help the drawdown idea over those intervening years?

Sorry, no easy answers.
+ Reply to discussion

Markets

Other markets