Ns&i Index-Linked A Waste Of Time?

[guitarman001]

Shoved £11k into NS&I index-linked certs in July. According to the calculator, only made ~1.4% or so on them to date? Hell, I've made near 6 times that amount holding shares! Those of you who have these - how are you finding them to perform? This is meant to be my 'safe' money so I wouldn't put it into shares but I was expecting a tad more - even with the VAT rise next year it wont be a hell of a lot. Might as well have topped up more Lloyds Vantage accounts...

Edited November 12, 2010 by guitarman001

[dr ray]

For someone who has more than 3000 posts this shows a lack of financial understanding.

The return on NS&I is linked to RPI and you will only get the full value of projected return if held to maturity. If you only bought them in July I think you will find your return is actually zero if you cash them now.

If you knew the return on shares would be 6 times higher then you should have bought shares. Even better would have been agri commodities.

The problem is that you didn't know and you still don't know what will be the situation in another 6 months. At least with NS&I you do know

I hold a lot of NS&I and they performed exactly like I expected them to. My gripe is that RPI (though better than CPI or Core CPI) underestimates inflation because of product substitution (x becomes too expensive for people to buy therefore replaced with a cheaper alternative in index) and hedonistic adjustment (x product improves due to technological improvement but increases modestly in price eg cars, computers - considered to have become cheaper for index).

RPI has surprised me in still being under 5% now giving me the equivalent return of maybe 11% pa on a safe taxed deposit on my certificates. I did expect more. If I had waited until RPI was say 20% so that I would get the same return as a punt on cotton or sugar in the last few months I would not have been able to by NS&i because they were withdrawn when they began to look like a no-brainer.

[guitarman001]

Of course I know how they work! My point is that you can gauge how they're doing by looking at the figures for RPI and it I thought they would have been doing better (certainly I think inflation will rise but I think it seems higher to me than the figures represent).

As I said - this is my safe money, don't want to risk it on shares - shares are obviously higher risk.

Just a bum day for me. (P.S. harsh first comment!)

Edited November 12, 2010 by guitarman001

[dr ray]

Of course I know how they work! My point is that you can gauge how they're doing by looking at the figures for RPI and it I thought they would have been doing better (certainly I think inflation will rise but I think it seems higher to me than the figures represent).

As I said - this is my safe money, don't want to risk it on shares - shares are obviously higher risk.

Just a bum day for me. (P.S. harsh first comment!)

I thought RPI would be higher by now too. Real inflation certainly is. I think even RPI will kick off in the new year. Commodity prices take about 6 months to feed through to the shops and the VAT rise will come through too. Government is either betting or else misinforming us that the excess capaciy in the economy will prevent retailers passing on prices but we will have to see.

I think you will be glad you bought the NS&I certs especially if you are a higher rate taxpayer. There should be the opportunity to roll them on in 3-5 years too unless they change the rules and by then they will be like gold dust.

There is the currency risk too but unless you can get index linked bonds denominated in Yuan I can't see any way around this.

I thought BP would be a proxy for an index linked currency independant investment and I put a few Ks in this earler this year. Look where that got me.

[guitarman001]

I hope you're right - I do suspect you are regarding commodities - and then obviously VAT knocking it up for sure.

Not sure about rolling it over - if houses are cheaper in 3 years when mine ends I might take it out to pay down a mortgage. Will see!

Sorry to hear about BP... you put any back in for the subsequent rise or have you held? I wish I bought Rolls a few days ago, back up 10% or so.

I just know the government will find some way to keep figures lower than they are.

[dr ray]

.....Sorry to hear about BP... you put any back in for the subsequent rise or have you held? I wish I bought Rolls a few days ago, back up 10% or so....

No I'm too much of a passive investor to have made any move. Just stared into the headlights. At least I didn't sell out at the bottom which is what most private investors end up doing.

[guitarman001]

Thankfully I've managed not to sell at any bottoms - I'm lucky enough to get out before big drops!

I also intend to hold for long periods of time, but sometimes there are opportunities where you could make a couple hundred in one week with a trade and sell - only worth it putting in a couple grand and risky, granted...... What is your take on house builders and the banks? They are my main equity investments for now - got LLOY at 63p and BDEV at 83p - never put TOO much in as can stomach a loss if they bottom out below these values, when I'll pile in much more (if something catastrophic doesn't happen)

[dr ray]

Thankfully I've managed not to sell at any bottoms - I'm lucky enough to get out before big drops!

I also intend to hold for long periods of time, but sometimes there are opportunities where you could make a couple hundred in one week with a trade and sell - only worth it putting in a couple grand and risky, granted...... What is your take on house builders and the banks? They are my main equity investments for now - got LLOY at 63p and BDEV at 83p - never put TOO much in as can stomach a loss if they bottom out below these values, when I'll pile in much more (if something catastrophic doesn't happen)

I'm not a trader so I avoid anything volatile. I've no idea on LLOY and BDEV but for someone with time and access to cheap trading the wild swings in price are ideal.

My priority is tax free income and capital growth as I pay tax at 50% and I don't have much time to track investments so I buy VCTs and high div stocks for my PEP (and gold legal tender coins) and just hold them. Its not been a highly successful strategy over the last 10 years because of losses on banks, BP and telecom and AIM VCTs in which I was overweight but I'm hoping I'll have a decent flow of tax free income when I retire in a few years

[TeddyBear]

My 3 year certs recently matured, some time in 2009 they were looking like a bad deal, ended up about 12% up this October. Looking month to month doesn't really help. I probably just got lucky though. Wish I'd had more at the time....

[ccc]

My 3 year certs recently matured, some time in 2009 they were looking like a bad deal, ended up about 12% up this October. Looking month to month doesn't really help. I probably just got lucky though. Wish I'd had more at the time....

I take it you are keeping them ? Still get RPI + 1% which is not too bad.

[Lagarde's Drift]

+1 to the first reply on this thread. Understand what RPI actually is, and look at the numbers published. Then understand the gilts. If you bought at the right time it would've been a canny move. It still may be - you need to have your 3yr or 5yr hat on.

I formed my opinion that RPI is just another lie, so I cashed out of mine after 1 year in winter 09, got something like 1.5% for the effort and ploughed it into other things which made me much more. In hindsight, a smart move, but at the time I was quite twitchy, not to mention the sheer amount of work ad stress involved in getting the returns. The index-linked gilt should form a decent part of any diversified portfolio.

[TeddyBear]

I take it you are keeping them ? Still get RPI + 1% which is not too bad.

Yes, will see how it goes this 3 years...

[ccc]

+1 to the first reply on this thread. Understand what RPI actually is, and look at the numbers published. Then understand the gilts. If you bought at the right time it would've been a canny move. It still may be - you need to have your 3yr or 5yr hat on.

I formed my opinion that RPI is just another lie, so I cashed out of mine after 1 year in winter 09, got something like 1.5% for the effort and ploughed it into other things which made me much more. In hindsight, a smart move, but at the time I was quite twitchy, not to mention the sheer amount of work ad stress involved in getting the returns. The index-linked gilt should form a decent part of any diversified portfolio.

So have you really got better returns than if just leaving it in a no worry RPI linked product - even if the RPI is a bit of a con ?

How many hours of more effort has it cost ? What would you charge yourself out for this sort of time ? If you had put the same amount of time into working at Tescos would the 'returns' have been less ? More ?

Not having a go - just interested. And you also have to remember the last year has been, according to many people, one of the easiest time to make money from general 'investments' ever. So is this really a good period to compare a steady return from ?

Yes, will see how it goes this 3 years...

Same here. The fact they are not on sale anymore is a good sign to me.

[Lagarde's Drift]

So have you really got better returns than if just leaving it in a no worry RPI linked product - even if the RPI is a bit of a con ?

How many hours of more effort has it cost ? What would you charge yourself out for this sort of time ? If you had put the same amount of time into working at Tescos would the 'returns' have been less ? More ?

Not having a go - just interested. And you also have to remember the last year has been, according to many people, one of the easiest time to make money from general 'investments' ever. So is this really a good period to compare a steady return from ?

Same here. The fact they are not on sale anymore is a good sign to me.

Er, yes, very much better returns of several orders of magnitude. Around 10-15 hours per week, in other words like a part-time job on top of my already hefty hours. With that kind of commitment I don't faff around with anything <50% annualised return, to be quite frank. So, as close to a Tesco wage as an astronaut is to a chicken. Yes, more than my hourly rate. Sounds too good to be true? Perhaps it is - I had to cope with 20-50% losses as I learnt, but have made it all back and much more. I've had to scale things back too, as the negative effects on my career, health and social life was becoming apparent.

Of course, it is not over by any means, and I have barely cashed in any of my investments so it could all go to pot. I have positioned myself well for what I believe is going to happen in the UK and globabally, and should do well if I am correct. If I'm wrong, well heck, I am really no worse off than the vast majority of people on this planet and am grateful for what I have.

I meant what I said - the NS&I indexed gilts should be a part of any diversified portfolio - I'm just not one of those diversified people.

[ccc]

Er, yes, very much better returns of several orders of magnitude. Around 10-15 hours per week, in other words like a part-time job on top of my already hefty hours. With that kind of commitment I don't faff around with anything <50% annualised return, to be quite frank. So, as close to a Tesco wage as an astronaut is to a chicken. Yes, more than my hourly rate. Sounds too good to be true? Perhaps it is - I had to cope with 20-50% losses as I learnt, but have made it all back and much more. I've had to scale things back too, as the negative effects on my career, health and social life was becoming apparent.

Of course, it is not over by any means, and I have barely cashed in any of my investments so it could all go to pot. I have positioned myself well for what I believe is going to happen in the UK and globabally, and should do well if I am correct. If I'm wrong, well heck, I am really no worse off than the vast majority of people on this planet and am grateful for what I have.

I meant what I said - the NS&I indexed gilts should be a part of any diversified portfolio - I'm just not one of those diversified people.

Well good luck to you. However I feel you may have been 'spoiled' by the last year and the returns most have got on investments ?

10-15 hours work per week ? With the greatest respect if you make 10% per year net you will be doing amazingly well, and I would like some tips !!

People who work full time on this, and have a team of analysts behind them, regularly make poorer returns and regulalry make large losses. If I were you I would be looking at my returns based on average returns of 5-10% net per year - and compare this to the net return from working the same hours for a basic wage. I feel this would give a better idea of the real rate of return of the effort you are putting in.

The odds are stacked against us individuals trying to make a decent return. That is the whole point I reckon.

[Lagarde's Drift]

Well good luck to you. However I feel you may have been 'spoiled' by the last year and the returns most have got on investments ?

10-15 hours work per week ? With the greatest respect if you make 10% per year net you will be doing amazingly well, and I would like some tips !!

People who work full time on this, and have a team of analysts behind them, regularly make poorer returns and regulalry make large losses. If I were you I would be looking at my returns based on average returns of 5-10% net per year - and compare this to the net return from working the same hours for a basic wage. I feel this would give a better idea of the real rate of return of the effort you are putting in.

The odds are stacked against us individuals trying to make a decent return. That is the whole point I reckon.

Thank you. I sincerely wish you the best of luck as your final paragraph is very much true.

I hope you will not take this in a patronising way as your previous posts describe you as a high earning individual with plenty of skills, intellect and financial capital (the usual HPCer?). I read for 10-15 hours per week in order to make far far more than 10% per year net. Without this work, the net return would probably be in the region of -50%pa, otherwise known as shooting blind and reaping the just rewards. I also do not count my chickens, as I could be wrong and it could all turn to dust. It is for this reason that I do not give advice for free to anyone, including friends. I do not want the moral bill of having others, perhaps loved ones, lose precious money based on what I told them to do - I have watched some of my smart friends get into a pickle like this. I also do not count myself savvy enough nor qualified to charge either, in short that means I do not tell anyone anything.

All I will say to anyone who asks is this - these are uncertain and volatile times we live in. There is increasingly the belief that there is nowhere to go with your cash, as you have stated above. Assumptions are being questioned and overturned. Maybe one day you will overturn your assumption that 10% net pa is good and proceed to capitalise, but if you don't, your diversified portfolio and incredible earnings should stand you in good stead anyway. I am still making mistakes, but the ratio of mistakes:success is changing and turning into a very profitable one. So far. There is no guarantee that what I am doing will work, and every chance that I will end up starting again from scratch.

The weird thing is, I found myself wallowing in bearishness about a year & half ago, with cash but riling against the world, the government, the banksters, the public servant pigs, etc. I joined this website and continued wallowing in my bearishness with some kindred souls. I then realised that nothing I could ever do would change that; you can vote for whoever you like but I think it is obvious that things are just going to carry on the way they are now. Nothing much has changed for most people in this country during the worst financial crisis in recent times - and the chaps in power are doing their utmost to keep the status quo. I believe they will keep the plates spinning for as long as is possible, perhaps far longer than the last bear on here can stand.

Look back on all the old posts on this forum, they are so very instructive. So many bears STRing or saving their FTB fund from 2002 onwards only to lose so much opportunity cost, inflation cost, etc, and perhaps losing out on happiness too. Look at posts from Serpico and his like - what so many here are praying to happen is just that - financial armageddon with the huge pain and fallout nationwide. People losing jobs everywhere , pain everywhere, no one spared. Be careful what you wish for. I think the chaps in charge know this and are doing their utmost to ensure this stretches out for as long as possible. Look at Ireland or Greece and their pain and subsequent brain drain. We don't really want to make our brain drain any worse, do we?

This does not make me a housing bull, not even a neither. I am a house price bear, but I believe that house prices will only show minor nominal falls over the foreseeable future. Yes, the idiots will be saved at our cost, providing they have enough capacity to make the mortgage payments. This realisation shocked me, I got even more depressed at the prospect of slaving away until I was 80 years old but with no pension (really I think pensions will be a thing of the past by then). So I dug deep and had a change of heart, mind and outlook. This does not mean I am not angry anymore, nor that I would stoop to join the lowest in the trough. I am only making hay whilst the sun is still (just) shining.

Finally, I also believe that these financial jockeys and their "teams of analysts" have only one goal in mind - to make their company money, and pay themselves big money. If they happen to make you money, that is only a good side effect because they get bigger bonuses. If not, so what, they can say we tracked the market. That is why they are generally utter shite. Giving them some of your capital to play with can be good for us amoeba, but only in very select situations.

p.s. to get this back OT, I do think NS&I index-linked gilts were a good buy, if they do reappear there will probably be a stampede for them. That is also quite illuminating isn't it?

[ccc]

Cheers - interesting post. I agree with much of what you say. Still undecided on whether HPC will be nominal or real though. I do think nominal falls will come in larger amounts - however I would not be shocked if it is mostly real falls from now on.

As for the bearishness of this site I know exactly what you mean. No point thinking everything is going down - it won't and never will.

So how long have you been doing this 10-15 hours per week for ?

I have just been stung on my few forays into it - makes it more difficult to dive back in there !!

[Lagarde's Drift]

Hi,

You may be right, perhaps bigger nominal falls during a proper capitulation phase, but I'm not going to sit on my rear waiting for it to happen. I wish I got my parents to fund me a house purchase to live in ad a student at the turn of the century, in many ways I am only beginning to catch up on the gains some of my university friends got for free.

18 months, roughly equal phases of learning, practice with losses and now paper profit. Most people lose because they haven't dedicated enough time, are too emotional with fear or greed, or plain unlucky. Like I said, I could lose it all, but at this moment that is no different from watching it ebb away in a savings account.

[Lagarde's Drift]

Ps if you wish to do something be prepared to work hard and only risk what you are willing to lose. No loans or stupid margins.

What can you do? Doesn't matter. There are people out there trading the gold silver ratio irrespective of price, other have a second job on eBay selling stuff they made. As ling as you find you zulu and know him well you will be ok.

Our parents and people around the globe did and do not have access to what we do now. To not use these opportunities and then complain about it is pretty sad Imho.