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Fund/IT with "savings like" stability?
Aminatidi
Posted: 21 April 2018 08:03:14(UTC)
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Of course if there truly was one nobody would use savings accounts but... I've settled on the following as my core holdings that I intend adding to in a combination of lumps and monthly regular investments through the platform I use:

  • Lindsell Train Global Equity
  • Fundsmith
  • Buffettology

The plan (such that it exists) is simply to add equally to each and not overthink too much.

That leaves a dilemma for the cash which I don't anticipate needing, but would dearly love to make a little more than NS&I can offer but ideally with the safety net that if I ever did need it as "cash" I could be reasonably confident that it'll be available to within 85% or so of what I put in.

I do already have a chunk of RCP and was considering that, I get the obvious concern around fees but I'm on a fixed platform and to my simple mind all holdings report returns net of their fees.

Is there anything out there that can offer this kind of safety net or am I looking for a unicorn?
2 users thanked Aminatidi for this post.
Andrew Smith 259 on 22/04/2018(UTC), mcminvest on 23/04/2018(UTC)
Apostate
Posted: 21 April 2018 08:32:02(UTC)
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UK gilt funds are about 4.5% annualised this century and I believe haven't had a catastrophic drop at any point. But I keep reading that interest rates are going to shoot up making them worthless :-)

Maybe 50% UK gilt funds 50% NS&I Bond?
4 users thanked Apostate for this post.
Aminatidi on 22/04/2018(UTC), Guest on 23/04/2018(UTC), Guest on 23/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
Tom Bards
Posted: 21 April 2018 09:25:59(UTC)
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If I were you I would sell RCP as the cost on it is frankly extortionate.


I would guess the only thing that would suite what you're asking for would be bonds but given the current state of the bond market I'm not sure I would recommend it. Depends on the portfolio weighting.
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Aminatidi on 22/04/2018(UTC)
Mr Helpful
Posted: 21 April 2018 09:56:31(UTC)
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Aminatidi;60997 wrote:
That leaves a dilemma for the cash which I don't anticipate needing, but would dearly love to make a little more than NS&I can offer but ideally with the safety net that if I ever did need it as "cash" I could be reasonably confident that it'll be available to within 85% or so of what I put in.
Is there anything out there that can offer this kind of safety net or am I looking for a unicorn?

Yes, may well be on a unicorn search.

However if Bonds are on the menu, remember 'duration' or 'interest rate risk'.
From an earlier post where the subject arose :-
"As a general rule, for every 1% change in interest rates (increase or decrease), a bond’s price will change approximately 1% in the opposite direction, for every year of duration. If a bond has a duration of five years and interest rates increase 1%, the bond’s price will drop by approximately 5% (1% X 5 years). Likewise, if interest rates fall by 1%, the same bond’s price will increase by about 5% (1% X 5 years)."
Investopedia

Frank Armstrong and Tim Hale both advocate keeping Bond exposures to short-duration.
I.E. Not to take uneccesary risk on the supposedly defensive side.

IGLT Total Gilts has an effective duration of 11.14 years, current yield circa 1.32%
IGLS Short-Term Gilts has an effective duration of 2.44 years (but a lousy yield), current yield circa 0.54%
IS15 Short-Term Investment Grade UK Corporates has an effective duration of 2.59 years, current yield circa 2.18%

Look at the past performance before making any decisions.

An advantage of these is that they can be held within an ISA pending later deployment into Stocks.
4 users thanked Mr Helpful for this post.
Aminatidi on 22/04/2018(UTC), mcminvest on 23/04/2018(UTC), Law Man on 23/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
King Lodos
Posted: 21 April 2018 13:20:32(UTC)
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Gilt yields are the best predictor of returns ..

So, 10 years ago (2008) and at the start of the century, where were they? Between 4 and 5% .. So 4.5% annualised this century is exactly what you'd expect.

http://blog.independent-investor.com/wp-content/uploads/2010/08/uk-10-year-bond-over-20-years.png

Today, however, UK 10yr gilt yields are 1.49% .. So that's what you should expect .. NS&I bonds are likely better value.
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Aminatidi on 22/04/2018(UTC), mcminvest on 23/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
Aminatidi
Posted: 22 April 2018 08:30:22(UTC)
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So short answer "no" then :)

I'm re-visiting what I originally put into my ISA with a view to reducing things down to focus on those three, it's only been a few months since I started but interesting how I'd like to think I've absorbed quite a lot v the initial heady rush of "must add holdings".
Jim S
Posted: 22 April 2018 09:12:10(UTC)
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Aminatidi;60997 wrote:


That leaves a dilemma for the cash which I don't anticipate needing, but would dearly love to make a little more than NS&I can offer but ideally with the safety net that if I ever did need it as "cash" I could be reasonably confident that it'll be available to within 85% or so of what I put in.

I do already have a chunk of RCP and was considering that, I get the obvious concern around fees but I'm on a fixed platform and to my simple mind all holdings report returns net of their fees.

Is there anything out there that can offer this kind of safety net or am I looking for a unicorn?


Looked into Hawksmoor Vanbrugh Fund ?
3 users thanked Jim S for this post.
Jenki on 22/04/2018(UTC), Aminatidi on 22/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
Tim D
Posted: 22 April 2018 09:51:18(UTC)
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Aminatidi;60997 wrote:
That leaves a dilemma for the cash which I don't anticipate needing, but would dearly love to make a little more than NS&I can offer but ideally with the safety net that if I ever did need it as "cash" I could be reasonably confident that it'll be available to within 85% or so of what I put in.


RICA and CGT both had maximum drawdowns of around 15% during the credit crunch - so, compatible with your 85% preservation goal - and ultimately came out of the episode rather well (no guarantees they'd be able to pull off such a feat again in a future crisis of course). Over a long enough timescale I believe their returns have been at least comparable with the FTSEAllShare, but you do have to look at a long enough period to include a crisis or two... basically these funds have made their money slow-and-steady and then - most importantly - by not giving up most of their gains when everyone else does. PNL generally also considered another member of this "permabear" club, but I'm less sure about its max drawdown.

Does always surprise me when people mention RCP as a defensive. It's 2008 drawdown approached 40% looking at trustnet's chart. Although to be fair I think it did recover a bit quicker than the AllShare. I'd certainly consider it an "alternative"... just not a "defensive" one.
3 users thanked Tim D for this post.
Aminatidi on 22/04/2018(UTC), Law Man on 23/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
Jenki
Posted: 22 April 2018 10:27:26(UTC)
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I agree with Jim, take a good look at Hawksmoor.

I am invested in the Vanbrough and distribution funds, along with NS&I bonds.



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Aminatidi on 22/04/2018(UTC)
King Lodos
Posted: 22 April 2018 14:20:51(UTC)
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I'm a fan of Hawksmoor .. I think the team are very good; they consider value and momentum; the fund of funds approach gives them a lot of flexibility and multiple perspectives – which is what you want in a low volatility fund.

I have cut the position quite a bit this year, as I feel less positive on bonds, and, anticipating lower returns, the fee becomes more of an issue (I think it is a bit over 1.5, being a fund of funds).

So you have to weigh it up against a top equity fund rebalanced against cash .. If you had 50% Fundsmith, and 50% cash, and rebalanced every month, you *might* find you get the low volatility behaviour you're looking for, and the fee across that would be 0.5% (if you can get any interest on the cash, even better).

You can try monthly rebalanced stocks and cash here:
https://www.portfoliovisualizer.com/backtest-asset-class-allocation

That's just me .. My instinct is to get out of the middle of the market a bit more, and barbell between stocks and cash .. You can achieve any level of volatility balancing between the two – the question is: are there parts of the market you can find better value, and I'm not sure at the moment.
3 users thanked King Lodos for this post.
Aminatidi on 22/04/2018(UTC), Fell Walker on 22/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
Aminatidi
Posted: 22 April 2018 15:38:50(UTC)
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Keep coming back to cash.

Chances of NS&I rates going up? I guess if they do just close the bond, take the penalty (if the maths adds up) and move across?

Right now a combo of a Growth Bond and Direct Saver looks reasonably sensible for easy access and some reasonable return plus absolute safety.

It would leave me with something like:


  • £50k NS&I Bond
  • £50k Direct Saver
  • £17.5k NS&I ILSC
  • £33k 2017/18 S&S ISA
  • £7.5k 2018/19 ISA


With the rest in the bank.
King Lodos
Posted: 22 April 2018 16:51:01(UTC)
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Aminatidi;61052 wrote:
Keep coming back to cash.

Chances of NS&I rates going up? I guess if they do just close the bond, take the penalty (if the maths adds up) and move across?

Right now a combo of a Growth Bond and Direct Saver looks reasonably sensible for easy access and some reasonable return plus absolute safety.

It would leave me with something like:


  • £50k NS&I Bond
  • £50k Direct Saver
  • £17.5k NS&I ILSC
  • £33k 2017/18 S&S ISA
  • £7.5k 2018/19 ISA


With the rest in the bank.


Well bear in mind cash (even at 2.2%) is still likely losing value to inflation .. It's certainly not an investment .. I think it's 50% disaster insurance, and 50% optionality (to buy if better prices become available).

But I'd always say: hold the portfolio that achieves your long-term aims, because there'll always be something to worry about .. Like Jack Bogle, I kind of like 50:50 risk and no risk .. But if you're still earning/investing, you can afford to take a lot more risk.
3 users thanked King Lodos for this post.
Aminatidi on 23/04/2018(UTC), mcminvest on 23/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
AJW
Posted: 23 April 2018 09:36:25(UTC)
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This was supposed to be the gist for absolute return funds wasn't it (haha!)
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Aminatidi on 23/04/2018(UTC)
StepM
Posted: 23 April 2018 15:30:48(UTC)
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GAM Star Credit Opportunities, has same risk has Hawksmoor and somewhat better returns.
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Aminatidi on 23/04/2018(UTC)
Aminatidi
Posted: 23 April 2018 16:55:42(UTC)
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AJW;61084 wrote:
This was supposed to be the gist for absolute return funds wasn't it (haha!)


I believe most of them have a caveat about "over 3 years" - I sure as hell haven't seen one I'd be prepared to hold as a savings substitute :)
Aminatidi
Posted: 23 April 2018 17:01:49(UTC)
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Rather than start a new thread, given I hope to focus on the three funds in the opening post I'm thinking of clearing out some of the "let's go and diversify" stuff I hold:

  • SMT £5k
  • RCP £5k
  • EWI £2.5k
  • BGS £2.5k

I'd like to "free up" £5k within the ISA to add to Fundsmith and Buffettology to get them to the same level as Lindsell Train Global, currently have:

  • Fundsmith £5k
  • Buffettology £5k
  • Lindsell Train Global £7.5k

SMT and RCP are on a small profit, I'd take a small hit on EWI and BGS.

Or I could simply leave things for a bit.
2 users thanked Aminatidi for this post.
Jim S on 23/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
King Lodos
Posted: 23 April 2018 17:08:50(UTC)
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GAM Star Credit Ops has been something I've recommended for a while .. (it was my largest holding for the past couple of years)

But don't mistake the low volatility for low risk .. It's extremely concentrated in long duration bonds of UK financial services.

As the recent volatility showed, it can be hit hard by relatively minor things .. A smooth share price is no free lunch

Jim S
Posted: 23 April 2018 17:13:19(UTC)
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Aminatidi;61120 wrote:
Rather than start a new thread, given I hope to focus on the three funds in the opening post I'm thinking of clearing out some of the "let's go and diversify" stuff I hold:

  • SMT £5k
  • RCP £5k
  • EWI £2.5k
  • BGS £2.5k

I'd like to "free up" £5k within the ISA to add to Fundsmith and Buffettology to get them to the same level as Lindsell Train Global, currently have:

  • Fundsmith £5k
  • Buffettology £5k
  • Lindsell Train Global £7.5k

SMT and RCP are on a small profit, I'd take a small hit on EWI and BGS.

Or I could simply leave things for a bit.


Don't just do something, sit there :)

I would leave alone for a while unless you have a good reason you want to sell one. BGS is at a high premium, but it continues to thrive anyway. RCP is pricey but doing OK. I certainly wouldnt sell SMT at the moment.
2 users thanked Jim S for this post.
Aminatidi on 23/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
Tom Bards
Posted: 23 April 2018 17:29:35(UTC)
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Aminatidi;61120 wrote:
Rather than start a new thread, given I hope to focus on the three funds in the opening post I'm thinking of clearing out some of the "let's go and diversify" stuff I hold:

  • SMT £5k
  • RCP £5k
  • EWI £2.5k
  • BGS £2.5k

I'd like to "free up" £5k within the ISA to add to Fundsmith and Buffettology to get them to the same level as Lindsell Train Global, currently have:

  • Fundsmith £5k
  • Buffettology £5k
  • Lindsell Train Global £7.5k

SMT and RCP are on a small profit, I'd take a small hit on EWI and BGS.

Or I could simply leave things for a bit.



Sell RCP. Charges are ridiculous.

Edit: Didn't realize I had already responded to the OP, apologies.
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Aminatidi on 23/04/2018(UTC)
Aminatidi
Posted: 23 April 2018 17:30:20(UTC)
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Ironically I'm listening to a podcast which is interviewing Terry Smith.

I've heard the words "do nothing" lots, I need to learn to do this :)
2 users thanked Aminatidi for this post.
dyfed on 23/04/2018(UTC), dlp6666 on 24/04/2018(UTC)
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