How To Protect Your Hpc Fund

[wherebee]

The title is a bit disingenous, as I am actually asking the HPC collective for advice (and insults please - I always hope for a couple).

. Main thread qualifier as it underpins how the high house prices and attendant costs are forcing me to wait and wait and buy once, rather than buying near work and buy/sell each time we move jobs.

So - after much saving and scrimping, we have saved around 300k aussie (150-200k english) in the house fund. Now, that is a LOT of money, but we won't be ready to buy until mid-late 2015 due to family and work commitments. We might buy in NZ, Aus, or (long shot) UK outside the SE. Ideally we will buy a small place mortgage free and be able to stick two fingers up to the debt system.

The question now praying on my mind is where to put this so it's safe, bearing in mind the likelihood of a financial crisis crack up boom before end of 2015 is, in my view, about 1 in 6. Having it all in a bank would risk a bail in disaster.

Funds are currently split across banks in multiple countries, earning 2-4%, plus a small basket of shares.

So - rules of the game are:

NO PHYSICAL GOLD (we rent and travel a lot and have nowhere safe to store)

locations can be in UK/OZ/HK/NZ

Any ideas out there?

[miggy]

Given your timescales I would stick 2.5-5% in bitcoin (cold wallet stored in a safe or strongly encrypted digital file in a couple of locations online, pm to ask how). That's not too much to risk but if it works out, and things are generally looking good, then it could give a very nice boost when you're ready to buy. Tax situ depends where you are taxed and is still being worked out, but in the UK they may be removing capital gains after holding them for 12 months.

Are you covered by the guarantee scheme in the UK as I believe that is still per bank rather than in total? Keep the amount in each bank somewhat lower than the limit is really worried. Start with gov owned banks.

[Frank Hovis]

The title is a bit disingenous, as I am actually asking the HPC collective for advice (and insults please - I always hope for a couple).

. Main thread qualifier as it underpins how the high house prices and attendant costs are forcing me to wait and wait and buy once, rather than buying near work and buy/sell each time we move jobs.

So - after much saving and scrimping, we have saved around 300k aussie (150-200k english) in the house fund. Now, that is a LOT of money, but we won't be ready to buy until mid-late 2015 due to family and work commitments. We might buy in NZ, Aus, or (long shot) UK outside the SE. Ideally we will buy a small place mortgage free and be able to stick two fingers up to the debt system.

The question now praying on my mind is where to put this so it's safe, bearing in mind the likelihood of a financial crisis crack up boom before end of 2015 is, in my view, about 1 in 6. Having it all in a bank would risk a bail in disaster.

Funds are currently split across banks in multiple countries, earning 2-4%, plus a small basket of shares.

So - rules of the game are:

NO PHYSICAL GOLD (we rent and travel a lot and have nowhere safe to store)

locations can be in UK/OZ/HK/NZ

Any ideas out there?

I think you already have it right. As you're less than two years away from needing it you don't want to risk any capital loss which you would do if you chased income or gains. I'd stick on that hand.

[Wurzel Of Highbridge]

Euros under the bed:

> Safe from bank collapse

> Safe from confiscation

> Safe from devaluation (for now)

I wouldn't hold my cash in GBP as when the current debt binge/growth comes to a halt they will devalue the pound again.]

Edited January 18, 2014 by Gone to Ireland.

[longtomsilver2]

You could invest your HPC fund in buying a property outright (ultimate hedge), rent it out for the time you're away and moving this income stream into Bitcoin and if TSHTF you could always move in yourself.

[winkie]

How much are you saving a month into your hpc fund?

You could buy a small place in the place you would like to eventually live using some of your savings as a deposit to get the best interest rate and use part or all of monthly savings to repay the mortgage........you would still have say £100k in cash to hunt for the best safest rates tax free if you can......spread and hedge.......just an idea, there is a risk to everything, if the house is to be a long-term home the risk will be much less.

[silver surfer]

You say you'll need the cash in mid 2015. That's only 18 months away so you're not in a position to invest in fluctuating, volatile assets like equities (or Bitcoin!). Basically you need to have the money on deposit in the most secure way you can find and earning the least derisory interest rates you can get.

You say you're most likely to spend the money in Oz or NZ. You need to make sure you're not exposed to exchange risks in these country's currencies.

So, on deposit spread around Australian and NZ banks.

Anything else is just speculation.

[Ah-so]

In terms of buying date, you are now quite close, which suggests you do not want highly speculative investments, or anythihng that could lose 10% of its value in a year.

Shares, gold, bitcoins can all do that. At this point you really need to be looking at cash. For all the doom that you read on these pages we are not going to have hyper-inflation in the next year.

Your principle concern is foreign exchange, but only if you do not buy in Australia. An FX rate can easily move +/-20% in a year. The Aussie is closely linked to commodity values and has lost a lot of its value over the course of 2013. You might consider hedging the value of your AUD through options. Obviously the sooner you decide where you are going to live the better.

[The Knimbies who say No]

Dunno if it makes a difference but may be good to be aware of the fact that Aussie/UK banks may be related e.g. Yorkshire/Clydesdale are owned by an Aussie bank so the diversification might not be as it seems were you to have accounts with components of the same group.

That said, your strategy seems a giod one so far- capital risk seems to be the last thing you need so avoid rash moves.

[jonpo]

You sound like you have the right asset mix already... However one thing you might want to consider is buying a plot of land or a 'section' as they say in nz... That way your almost fully hedged against fx and land price changes

[R K]

For 12 months?

Short term govvies.

Max risk - couple of % inflation.

[Democorruptcy]

The title is a bit disingenous, as I am actually asking the HPC collective for advice (and insults please - I always hope for a couple).

. Main thread qualifier as it underpins how the high house prices and attendant costs are forcing me to wait and wait and buy once, rather than buying near work and buy/sell each time we move jobs.

So - after much saving and scrimping, we have saved around 300k aussie (150-200k english) in the house fund. Now, that is a LOT of money, but we won't be ready to buy until mid-late 2015 due to family and work commitments. We might buy in NZ, Aus, or (long shot) UK outside the SE. Ideally we will buy a small place mortgage free and be able to stick two fingers up to the debt system.

The question now praying on my mind is where to put this so it's safe, bearing in mind the likelihood of a financial crisis crack up boom before end of 2015 is, in my view, about 1 in 6. Having it all in a bank would risk a bail in disaster.

Funds are currently split across banks in multiple countries, earning 2-4%, plus a small basket of shares.

So - rules of the game are:

NO PHYSICAL GOLD (we rent and travel a lot and have nowhere safe to store)

locations can be in UK/OZ/HK/NZ

Any ideas out there?

3 x £67k deposits on a small property in Oz, NZ & UK that you would be happy to live in, with as long a fixed rate mortgage as possible. Rent all 3 out now, then later you can decide which one you want to live in.

Controversial.....? Who....? Me...?

[miggy]

I wouldn't move more than 5% into bitcoin (unless you understand it and the risks) but the posts saying you shouldn't because of the short timescale are completely wrong! That's exactly why bitcoin is a brilliant hedge.

Bitcoin is on a huge upward move that has a long way to go, if it works out. It is has periods of high volatility which affect day traders but that wouldn't not effect you since you would have a few months during which to decide when to get out and at what point. Bitcoin moves more 10% in a day when volatile but check the weekly and monthly values for the last 12 months. Within 3-6 months it's expected that major Wall Street firms will be buying in (I know this to be planned by small and mid sized firms for sure) and I would expect a major upwards move again between April and June, possibly earlier.

Moreover, it's a hedge. If a bad economic situation occurs with banks, bitcoin will feel the benefit. Worst case, you didn't risk much. Best case, by mid 2015 you have 10x growth.

Happy to talk off the forum about it.

[crashmonitor]

An obvious answer, but I would be wary of any fund that tries to replicate the movement of residentail property...........

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=11F2G

[Ah-so]

I wouldn't move more than 5% into bitcoin (unless you understand it and the risks) but the posts saying you shouldn't because of the short timescale are completely wrong! That's exactly why bitcoin is a brilliant hedge.

Bitcoin is on a huge upward move that has a long way to go, if it works out. It is has periods of high volatility which affect day traders but that wouldn't not effect you since you would have a few months during which to decide when to get out and at what point. Bitcoin moves more 10% in a day when volatile but check the weekly and monthly values for the last 12 months. Within 3-6 months it's expected that major Wall Street firms will be buying in (I know this to be planned by small and mid sized firms for sure) and I would expect a major upwards move again between April and June, possibly earlier.

Moreover, it's a hedge. If a bad economic situation occurs with banks, bitcoin will feel the benefit. Worst case, you didn't risk much. Best case, by mid 2015 you have 10x growth.

Happy to talk off the forum about it.

Basically you are saying that because Bitcoin is highly volatile it is a good short-term way to invest a property deposit. Hmmm...

[miggy]

Basically you are saying that because Bitcoin is highly volatile it is a good short-term way to invest a property deposit. Hmmm...

No. I am saying that the volatility affects day traders only, give or take. Look at the monthly figures and it's a very different story. Over the timescale we're considering here, it's a really good hedge for a very small amount, say 2.5% to 5%. The downside is lose it all. Very possible but the chances are way lower than they were a few months ago. The upside is 5-15x gain. If we get banking concerns, expect the higher end of the upside. I don't think we will but the op clearly has concerns here.

Look at any long term and pref logarithmic graph of bitcoin prices to see what I mean, don't take my word for it.

Edited January 19, 2014 by miggy

[crashmonitor]

Trouble with trying to second guess the Markets to protect a HPC fund is that it will probably end in tears.

In 2008 it was popular on this forum to recommend yen because it had killed the pound in the preceding five years. In the last five years not only would you have got zero interest and accrued charges but the exchange would have moved against you.

http://www.indexmundi.com/xrates/graph.aspx?c1=JPY&c2=GBP&days=1825

(looks rather like the house price chart, funny how the pound strengthens when it buys less real estate)

Similarly gold was vogue in 2011, and since the fund would have been crucified.

Meanwhile the pound was generally regarded as a joke, but the joke ended up on the rest of the world this past year.

Best play safe and certainly not worth gambling because pounds will be needed to buy that house.

Edited February 1, 2014 by crashmonitor

[wherebee]

Trouble with trying to second guess the Markets to protect a HPC fund is that it will probably end in tears.

In 2008 it was popular on this forum to recommend yen because it had killed the pound in the preceding five years. In the last five years not only would you have got zero interest and accrued charges but the exchange would have moved against you.

http://www.indexmundi.com/xrates/graph.aspx?c1=JPY&c2=GBP&days=1825

(looks rather like the house price chart, funny how the pound strengthens when it buys less real estate)

Similarly gold was vogue in 2011, and since the fund would have been crucified.

Meanwhile the pound was generally regarded as a joke, but the joke ended up on the rest of the world this past year.

Best play safe and certainly not worth gambling because pounds will be needed to buy that house.

Understand the sentiment - but I trust the UK gvt a lot less than the AUS or NZ gvt (or HK gvt!) when it comes to bail ins taking savers money...!

[Guest TheBlueCat]

The title is a bit disingenous, as I am actually asking the HPC collective for advice (and insults please - I always hope for a couple).

. Main thread qualifier as it underpins how the high house prices and attendant costs are forcing me to wait and wait and buy once, rather than buying near work and buy/sell each time we move jobs.

So - after much saving and scrimping, we have saved around 300k aussie (150-200k english) in the house fund. Now, that is a LOT of money, but we won't be ready to buy until mid-late 2015 due to family and work commitments. We might buy in NZ, Aus, or (long shot) UK outside the SE. Ideally we will buy a small place mortgage free and be able to stick two fingers up to the debt system.

The question now praying on my mind is where to put this so it's safe, bearing in mind the likelihood of a financial crisis crack up boom before end of 2015 is, in my view, about 1 in 6. Having it all in a bank would risk a bail in disaster.

Funds are currently split across banks in multiple countries, earning 2-4%, plus a small basket of shares.

So - rules of the game are:

NO PHYSICAL GOLD (we rent and travel a lot and have nowhere safe to store)

locations can be in UK/OZ/HK/NZ

Any ideas out there?

The only answer is to diversify across asset classes and regions. Something like:

25% cash

25% bonds

25% equities

20% commercial property

5% precious metals / commodities etc.

Then spread it across Aus, UK and North America.

There's no guarantee that will protect it but the chances are when one thing goes down, something else goes up. Use ETFs or low cost mutual fund trackers as far as is possible.

This is the basic strategy I've used for the last 20 years and I've managed to average inflation + 2 or 3% over that period so it does appear to work. Don't mess about trying to time the market either, just rebalance as and when stuff falls and rises.

[Guest TheBlueCat]

Basically you are saying that because Bitcoin is highly volatile it is a good short-term way to invest a property deposit. Hmmm...

No real comment about bitcoin, but the maths does show that adding a high volatility fund to a large portfolio can reduce the volatility of the whole.

http://individual.troweprice.com/retail/pages/retail/applications/investorMag/2013/september/investor-plus-october/index.jsp

Really it's just about diversification though. I reckon bitcoin will either go to the moon or zero. I'm not sure that's the kind of risk I like to live with.

[Frank Hovis]

No real comment about bitcoin, but the maths does show that adding a high volatility fund to a large portfolio can reduce the volatility of the whole.

http://individual.troweprice.com/retail/pages/retail/applications/investorMag/2013/september/investor-plus-october/index.jsp

Really it's just about diversification though. I reckon bitcoin will either go to the moon or zero. I'm not sure that's the kind of risk I like to live with.

The ultra high risk in my portfolio comes from buying lottery tickets on roll-over jackpot draws. I'm usually down £40 a year but it balances out the low risk of the rest of it. Not being sarcastic btw.