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where to stick £78 000 to at least retain it's value for 6 years
eain
Posted: 28 May 2017 06:26:39(UTC)
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Have £78000 sitting currently in cash. Looking to draw this down from age 55 until final salary pension kicks in when I am 60, I am currently nearly 49. So I need somewhere to stick this money to ensure it will retain it's value plus possibly a little growth. With inflation picking up I am worried about it loosing value, happy to wait for any pull back/correction in the market .

thanks for any sugestions
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Guest on 30/05/2017(UTC)
Mickey
Posted: 28 May 2017 08:03:18(UTC)
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A capital preserver worth looking at might be 'Personal Assets IT or Capital Gearing IT.
Alan Selwood
Posted: 28 May 2017 08:58:33(UTC)
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What you haven't said yet is whether the £78000 needs to be drawn in its entirety over those five years or whether you have any other sources of income during tbe five years, whether you might need to spend any of it before you are 55, your tax rate, whether you have done this year's ISA, and probably a few other important bits of information​.

Subject to gour thoughts on such points, you may find a mix of short term cash, equities, short term bonds and gold useful. In other words, not unlike Personal Assets Trust in concept. But do spread your assst classes so as to smooth your portfolio's progress. And drip-feeding the equity portion over a couple of years may be prudent. Some now, some after the election, some 3 mths later, etc.
eain
Posted: 28 May 2017 10:49:47(UTC)
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will withdraw the entire £78000 over 5 years

also have other cash to make up to £24 k annual income- in santander 123, nsi and atom 2 and 3 year

teachers pension will kick in at 60- want to take it un-reduced

I'll take a look at the two suggested trusts- thanks
eain
Posted: 28 May 2017 10:51:20(UTC)
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also meant to say have isas to the value of £118 K all inincome generating investment trusts- largest holding city of london
Mr Helpful
Posted: 28 May 2017 13:26:52(UTC)
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deleted (must read questions more carefully)
King Lodos
Posted: 28 May 2017 17:25:56(UTC)
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Larry Swedroe wrote a short piece on the best inflation hedges:
http://www.etf.com/sections/index-investor-corner/23917-swedroe-the-best-inflation-protection.html

So, commodities hedge very well – so you could look at a commodities ETF – but they can also lose value if things go the other way.

The only investments that guarantee you get your capital back are government bonds held to maturity .. You can get 1.94% right now on US Treasury bonds (buying them individually), but as Swedroe discovered, the best inflation hedge is short-term inflation-protected bonds (TIPS) .. And considering you're looking at 6 years, and not longer, you could hold a Short-Term TIPS fund or ETF (you'd want one that's currency hedged).

I hold a small amount in Royal London Short Duration Global Index Linked fund .. As you might be looking at a very small positive return (beyond the inflation hedge) you'd want to be with a cheap fund platform (or investing directly, if you can) to avoid the platform fee eating returns up.

The likes of Ruffer and Troy Trojan think TIPS could be a very good thing to own, and they load up quite heavily on them .. You could hold something like 80% Short-Duration TIPS, 15% in Fundsmith and 5% in a Commodities ETF.
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Joe Soap
Posted: 29 May 2017 01:05:00(UTC)
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It's just my opinion, of course, but to be advising anybody who needs access to his money in 5 or 6 years time to invest in anything other than cash is very bad advice. All assets are inflated in price right now. If you need the money it is a very bad idea to do anything with it that can result in value dropping as is very possible with any investment right now.
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MJPM on 30/05/2017(UTC), Tim D on 18/07/2017(UTC)
King Lodos
Posted: 29 May 2017 04:48:06(UTC)
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You can work out the best and worst case scenarios for every asset class.

Cash is a guaranteed loss against inflation. Government bonds guarantee your capital back after a fixed period, so long as they're not negative yielding, and you keep the duration under 6 years, you're not really looking at any risk to capital.

Whether a short-duration bond fund offers quite the same degree of protection is something I'd have to research – but they're not very sensitive to interest rates .. The main reason to hold cash is liquidity .. If it weren't for that, I'd hold a lot more in individual bonds (safer with amounts over the FSCS compensation limit too).

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Mr Helpful
Posted: 29 May 2017 08:13:59(UTC)
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eain;47229 wrote:
Have £78000 sitting currently in cash. Looking to draw this down from age 55 until final salary pension kicks in when I am 60, I am currently nearly 49. So I need somewhere to stick this money to ensure it will retain it's value plus possibly a little growth. With inflation picking up I am worried about it loosing value, happy to wait for any pull back/correction in the market .

thanks for any sugestions


Latest UK inflation data :-
CPIH 2.6%
CPI 2.7%
RPI 3.5%

As highlighted above, short term Bonds are the traditional safe place for capital preservation, but with all yields now sub-inflation (-ve real yields), that seems to guarantee a loss of (inflation adjusted) purchasing power.

PNL suggested above is the type of investment well worth considering, but be aware of the near 50% Stocks allocation.

The comment about pull back seems to indicate this is not a set it and forget it exercise, but an allocation to be tended over the interim years?
Taking all realisable assets into account it might help (or muddy the waters) if we knew how they break down percentage-wise :-
Stocks
Bonds
Less (Stock) Correlated Alternatives
Real Estate
Cash

With Bonds esp short-term as noted above offering -ve real yields, you might be about to join the hunt for 'Less Correlated Alternative' assets?
Worth exploring, but no guarantees there though !!!

There was a mention of 'NSI'.
If that is NS&I IL Certs (new issues currently not available) with their RPI link; then IMHO these are well worth hanging on to.
They fit the bill nicely.
Mr J
Posted: 29 May 2017 08:14:58(UTC)
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Think that Swedroe piece raises more questions than answers about whether the analysis is meaningful.

I always thought equities could offer inflation protection. Inflation pushes up company turnover and profit figures without the company having to do anything at all. There is the issue that when inflation rises interest rates tend to follow to push down on it, higher interest rates then impact business and the economy and share price p/e is likely to fall. So defensive equities perhaps.

In the end I doubt it is possible to ensure it doesn't lose value. You just have to invest in a mix of asset types in the long term expectation of beating inflation accepting you could lose money in real terms over any particular fixed horizon.
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Mr Helpful on 29/05/2017(UTC)
Alan Selwood
Posted: 29 May 2017 08:42:38(UTC)
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As in life generally, it is not always possible to get what you want.

If you must have the ability to withdraw cash to live on, and cannot afford to have a shortfall, then not only must you not put the capital at risk of falling to a lower value at the time you need it, but must protect its purchasing power too, since amounts required will increase with inflation.

Your perfect investment is therefore index-linked and only capable of increased value at the time needed. If you know of such an investment, the world will flock to your door!

If there was a range of index-linked gilts with staggered maturity dates and they were all for sale at a price that matched maturity value precisely discounted back to cover future inflatjon from now onwards, the solution would be there for you to grasp.

Sadly, indexed gilts are too highly priced currently to offer this.

So something has to give.

Cash gives you security but no inflation protection, fixed gilts give a small income that underruns inflation and guarantees loss of paper values to maturity and a greater loss of real value, equities have the potential to give capital gains and rising income, but over any time period, especially shorter ones, also have tbe potential for falling capital and reduced income.

There is no perfect solution here, just a mix of compromises.
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Sara G on 29/05/2017(UTC), dyfed on 29/05/2017(UTC), Micawber on 29/05/2017(UTC), Guest on 31/05/2017(UTC), s webster on 02/06/2017(UTC), Cyrus Zaydan on 02/06/2017(UTC), Guest on 16/07/2017(UTC)
Sara G
Posted: 29 May 2017 09:26:21(UTC)
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No one has mentioned infrastructure funds or P2P... given that there is no entirely risk-free solution, these might be worth considering as part of the mix.

I don't know much about P2P, but infrastructure funds may offer stable and rising income. Here's one yielding 4%, and in the comments you'll see other recommendations:

http://citywire.co.uk/mo...structure-fund/a1000523



3 users thanked Sara G for this post.
c brown on 29/05/2017(UTC), Mr Helpful on 30/05/2017(UTC), Mike L on 16/07/2017(UTC)
sandid3
Posted: 29 May 2017 10:39:07(UTC)
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A man sees that he must go outside
He enjoys wearing t-shirt and shorts
He waits for a sunny day
He puts on his t-shirt and shorts
The sun shines, the clouds gather
The snow falls
The man wears his t-shirt and shorts

Now if I could just turn that into a haiku, enlightenment.
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Mike L on 16/07/2017(UTC)
tiptopfund tiptopfund
Posted: 29 May 2017 11:28:10(UTC)
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Commodities have historically provided the best protection against inflation. This makes sense—if you're concerned that things will get more expensive in the future, it makes sense to buy those things now. Thanks to commodity-linked ETFs, it's now easy for retail investors to approximate pure plays on commodities.

Strictly speaking, a basket of commodities that mirrors your own consumption profile is a perfect inflation hedge. Going to buy 1,000 gallons of gasoline next year? 50 loaves of bread? Buy a futures contract for them today and lock in the price.

Source: https://www.quora.com/Ho...ver-the-next-few-years#!
chubby bunny
Posted: 29 May 2017 13:15:36(UTC)
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tiptopfund tiptopfund;47280 wrote:
Commodities have historically provided the best protection against inflation. This makes sense—if you're concerned that things will get more expensive in the future, it makes sense to buy those things now. Thanks to commodity-linked ETFs, it's now easy for retail investors to approximate pure plays on commodities.

Strictly speaking, a basket of commodities that mirrors your own consumption profile is a perfect inflation hedge. Going to buy 1,000 gallons of gasoline next year? 50 loaves of bread? Buy a futures contract for them today and lock in the price.


That's funny, I thought you were based in Estonia. Are you actually J. Bryan Scott from San Francisco, or did you just copy and paste those two paragraphs, without reference, from his answer on Quora ( https://www.quora.com/Ho...ver-the-next-few-years#!n=12 ) in order to build up your post count and make yourself seem more legitimate?
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BOB 2
Posted: 29 May 2017 13:53:09(UTC)
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Make your list out, and wait for the correction , it may be this week or next month
all is needed is a bit of bad news, and there is enough of that around.
i see all markets as over priced at the moment. so it will not take much to bring the roof down
ok i mite be wrong but unless i see a outstanding bargain i am holding back/cash
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Mickey on 30/05/2017(UTC), eain on 02/06/2017(UTC)
King Lodos
Posted: 29 May 2017 17:47:35(UTC)
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BOB 2;47289 wrote:
Make your list out, and wait for the correction , it may be this week or next month
all is needed is a bit of bad news, and there is enough of that around.
i see all markets as over priced at the moment. so it will not take much to bring the roof down
ok i mite be wrong but unless i see a outstanding bargain i am holding back/cash


Never wait for a correction.

Of course there's a good chance we'll get one, but the chance we don't puts you in a very difficult situation – one that's ruined careers, and forced great investors to sit out bull markets until they retire.

The reality is, at any time, stocks can plummet .. That's why you're compensated for the risk of holding them .. Sometimes a correction is the start of 15 more corrections (a bear market) .. Sometimes bear markets last 60 years .. And very often, corrections just don't come:

http://www.econlib.org/library/Enc/art/lfHendersonCEE2_figure_041.jpg
4 users thanked King Lodos for this post.
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P Everton
Posted: 29 May 2017 18:12:51(UTC)
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"That's why you're compensated for the risk of holding them".

Yea, unless you're not.
King Lodos
Posted: 30 May 2017 01:56:55(UTC)
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P Everton;47300 wrote:
"That's why you're compensated for the risk of holding them".

Yea, unless you're not.


Well that's the risk bit.

Otherwise the whole concept would fall apart!
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