The Saving And Investing Into The Doom And Gloom Thread

[R K]

You should still have 5% (or around that) in precious metals. Saying you 'don't fancy' gold is tantamount to saying you don't fancy insurance.

You don't buy gold because you 'fancy' it (or at least most people don't).

hopefully this wont turn into yet another gold thread.

Insurance is a rentier industry. It is a cost. A drag on performance. Far better to self-insure.

As I said, asset allocations are mostly irrelevant in any event.

[VeryMeanReversion]

I dont understand the case for P2P at all.

The spread between lending and savings rates is currently troughed by the banks.

P2P platforms allow savers to keep some of that spread. The platform fees and optional protection funds skim off some of that benefit but overall, the rates are much better than cash interest rates.

I was not convinced enough by the safety of Zopa/Ratesetter etc. to try it but HL are a multi-billion company with a very strong reputation to protect.

[VeryMeanReversion]

Yes, that's why I said buyers not owners.

I think the general principle of the people planning to FIRE seems to be rent while saving then buy for cash later on. Though WICAO posted it had cost him £95k renting instead of buying.

Better to buy when cheap, no matter when that is. That in itself massively increases your chances of FIRE.

I bought in 1997 (dark green), sold in 2003 (orange/red), bought in 2010 (yellow). Not perfect but good enough.

[Deft]

I will need to do some serious thinking once my pension pot hits £1million 15 years before I can retire.

[wish I could afford one]

Any thoughts about P2P within SIPP? Minor providers offer it but HL should be doing it later this year.

I'm now 75% equities and 25% cash in SIPP and want a better use for that cash over the long-term. I don't fancy bonds, gold, property.

The attractiveness of P2P is decent rates (with risk) and the money stays in the UK but is not going to the banks to be leveraged up into mortgages.

I invest outside ISA/SIPP in P2P through RateSetter. I started back in May 2014 and now have 4.6% of my wealth in P2P. Since that time including bonuses I've averaged an annualised return (XIRR) of 5.1%. Excluding bonuses I'd guess it's closer to 4.6%. If anybody after having done their own research is interested in RateSetter do PM me as I have a link that will give you £100 after a year (they give me £50) with the investment of a minimum £1,000. That's up to 10% before the investment return.

[wish I could afford one]

Ok. My impression was WICAO rents with a view to buying with cash in Malta (or similar) when FIREd. But Im not especially concerned with individual stories rather general principles.

You're correct and I'm also interested in general principles.

[wish I could afford one]

You should still have 5% (or around that) in precious metals. Saying you 'don't fancy' gold is tantamount to saying you don't fancy insurance.

You don't buy gold because you 'fancy' it (or at least most people don't).

My portfolio targets 5% in gold. I buy it because of it's different correlation with my other asset classes.

[wish I could afford one]

The bond market is the "bulk-funds" safe haven (gold market tiny in comparison). The 2007/8 financial crisis and demographic changes were a good reason to invest that way but it has just become another bubble. I was 50+% in index-linked bonds until 2015 but sold up completely.

Just like a BTL'rs balance sheet, current bond prices only make sense whilst interest rates are at historic lows. Property as a safe haven (safe pension the aim for many) makes sense until everyone is doing it and the price gets too high.

...

I don't drop in and out of asset classes but I do rebalance based on present rebalancing bands. My bonds are predominantly index linked gilts. In 2015 they did nothing but 2016 YTD they are up 17.2%.

Agree property is no safe haven and again hold for diversification. For a long time now I've been holding IPRP which is a European property fund. In 2015 that rose 6.1% (+ a divi of circa 2.5%) and in 2016 YTD it's up 17.9% (+ divi)

[wish I could afford one]

I will need to do some serious thinking once my pension pot hits £1million 15 years before I can retire.

That sounds like a potential disaster given current LTA rules. Are you serious and would like to elaborate or just making a joke I haven't understood?

[Deft]

That sounds like a potential disaster given current LTA rules. Are you serious and would like to elaborate or just making a joke I haven't understood?

Probably unlikely, I haven't got the ultra saving discipline of people in this thread. My pension fund would need to double through mostly investment growth every five years for the next fifteen years to even get remotely close.

[Deft]

But it seems a fun target. What is there left to do in life once you have hit the LTA everest peak.

[Frugal Git]

But it seems a fun target. What is there left to do in life once you have hit the LTA everest peak.

Plenty....you just need an imagination ;-)

I'd not exactly be disappointed to hit the LTA in mine, even if it was many years before I hit retirement. A pretty nice problem to have. My plan is to stack the pension now for another 3-5 years and then lower my annual contributions considerably, whilst going balls out to beat the market with a few good trades over the next 2 decades and wherever I end up is wherever I end up. I'll be going pretty much all equities or all cash in the pension at various points and my plan is to use the spidey sense. If I double the pot 3 times, I'm gonna hit the limit. There will be at least three decent ops to do that in 20 years I think, given that Gordy really didn't end boom and bust. Hells bells, there's a good chance to double the pot every 6 months if you know what you're doing with mining shares!! I don't really, but I'm nothing if not a nutter.

At that point I preferably ending up at whatever the limit is. Not prudent *at all*, not recommended *at all* - but I know myself and I'm a gambler at heart. It's worth a punt.

My final days may end up being penniless wandering with a backpack. Que sera sera. Comfort to me is somewhere to kip, a decent square meal and a decent chat.

Back to the limit. I think there's way's round that - and well before retirement and well before hitting the limit.

Though I've obviously not tried it and I'm still dubious over how much it could *potentially* be classed as a fairly aggressive form of tax avoidance. It's not something I particularly want to draw attention to, but I'm pretty sure that if one wanted to, there's a straightforward way - though not without a degree of financial risk/penalty way to get round it by 'hedging' your pension pot with a spreadbet or an ISA elsewhere....thank silly financial instruments like inverse ETF's or just good old fashioned shorting

I think the fact that it could work against you (i.e money flowing out of the ISA into the SIPP) means it can't be classed as anything other than a hedge....but if it flows the right way out it comes from the age based/lifetime allowance based wrapper and in it comes into the free as a bird ISA/spread bet. You'll lose the spread/fees etc - and if you pick the instruments badly potential contango effects destroy it - but I believe it to be feasible.

It would probably be even better implemented if you have a partner who you trust. Then you are just hedging each other.

This is in no way advice - it's purely hypothetical and you should do your own legal research before even considering it.

Plus it's better to just get your investments right in the first place and win in both wrappers. I'll worry about the tax implications if they look like happening.

[Democorruptcy]

Plenty....you just need an imagination ;-)

I'd not exactly be disappointed to hit the LTA in mine, even if it was many years before I hit retirement. A pretty nice problem to have. My plan is to stack the pension now for another 3-5 years and then lower my annual contributions considerably, whilst going balls out to beat the market with a few good trades over the next 2 decades and wherever I end up is wherever I end up. I'll be going pretty much all equities or all cash in the pension at various points and my plan is to use the spidey sense. If I double the pot 3 times, I'm gonna hit the limit. There will be at least three decent ops to do that in 20 years I think, given that Gordy really didn't end boom and bust. Hells bells, there's a good chance to double the pot every 6 months if you know what you're doing with mining shares!! I don't really, but I'm nothing if not a nutter.

At that point I preferably ending up at whatever the limit is. Not prudent *at all*, not recommended *at all* - but I know myself and I'm a gambler at heart. It's worth a punt.

My final days may end up being penniless wandering with a backpack. Que sera sera. Comfort to me is somewhere to kip, a decent square meal and a decent chat.

Back to the limit. I think there's way's round that - and well before retirement and well before hitting the limit.

Though I've obviously not tried it and I'm still dubious over how much it could *potentially* be classed as a fairly aggressive form of tax avoidance. It's not something I particularly want to draw attention to, but I'm pretty sure that if one wanted to, there's a straightforward way - though not without a degree of financial risk/penalty way to get round it by 'hedging' your pension pot with a spreadbet or an ISA elsewhere....thank silly financial instruments like inverse ETF's or just good old fashioned shorting

I think the fact that it could work against you (i.e money flowing out of the ISA into the SIPP) means it can't be classed as anything other than a hedge....but if it flows the right way out it comes from the age based/lifetime allowance based wrapper and in it comes into the free as a bird ISA/spread bet. You'll lose the spread/fees etc - and if you pick the instruments badly potential contango effects destroy it - but I believe it to be feasible.

It would probably be even better implemented if you have a partner who you trust. Then you are just hedging each other.

This is in no way advice - it's purely hypothetical and you should do your own legal research before even considering it.

Plus it's better to just get your investments right in the first place and win in both wrappers. I'll worry about the tax implications if they look like happening.

When you are all cash, is it in one place with just £50k FSCS compensation? A time when you want to be all cash, might be the same time a provider is most likely to hit trouble?

I see what you mean about hedging across two places, though one side might not pay out for some reason (going bust etc.). So it's not just fees, it's 3rd party risk?

[Frugal Git]

When you are all cash, is it in one place with just £50k FSCS compensation? A time when you want to be all cash, might be the same time a provider is most likely to hit trouble?

I see what you mean about hedging across two places, though one side might not pay out for some reason (going bust etc.). So it's not just fees, it's 3rd party risk?

Interesting question. I'm talking about all cash specifically within a SIPP, so I've had a quick look at the rules, and you're absolutely right. It looks like just 50k would be covered. I was - as you might expect with someone who plays fast and loose - living in blissful ignorance that a pension pot in a SIPP must be totally protected.

Yikes.

So the option is multiple SIPPs, or finding a vehicle as close to cash when the time comes.

Thanks for the tip. That's something that needs to be considered.

As for the third party risk side on the hedging transaction....yep, you would have to be careful. Or should. In any event, the 'hedge' should be fairly small at anyone time - something like 10% of the pot on value on either side, and trying to 'capture' some percentage in the right direction before closing the deal. It's a pretty outlandish idea anyway. Anyone who chooses to do it would have to have big balls, and are probably the sort to put caution to the wind when considering the 3rd party risk.

[VeryMeanReversion]

Interesting question. I'm talking about all cash specifically within a SIPP, so I've had a quick look at the rules, and you're absolutely right. It looks like just 50k would be covered.

So the option is multiple SIPPs, or finding a vehicle as close to cash when the time comes.

A single SIPP provider will/should spread their cash deposits across multiple licence holders. HL use 4-5, varies every day. This gives you £300K+ protection.

However, using multiple SIPP providers may overlap the licence holders so there may be some extra protection but not as much as you would expect.

I've reduced my SIPP cash to stay within the limits.

[VeryMeanReversion]

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Edited July 1, 2016 by VeryMeanReversion

[ARIMA]

Just go money markets fund or short gilts instead of cash to avoid any institutional risk. Works much the same for switching in and out of equities or other risk assets.

[Democorruptcy]

Just go money markets fund or short gilts instead of cash to avoid any institutional risk. Works much the same for switching in and out of equities or other risk assets.

Yes, that's the point I was trying to make. The 50k limit applies to cash but in theory investments are OK.

[R K]

has anyone addressed the counterparty risk issue with ETFs within a SIPP?

ETFs v funds ?

ETFs domiciled in Ireland & Luxembourg? especially with Brexit/Article 50 looming

Cash may be an issue in some cases (hl look to be very cash generative & carry no debt) but given the preponderance of ETFs, counterparty issues look a bigger risk (to me at least)

[Democorruptcy]

Interesting question. I'm talking about all cash specifically within a SIPP, so I've had a quick look at the rules, and you're absolutely right. It looks like just 50k would be covered. I was - as you might expect with someone who plays fast and loose - living in blissful ignorance that a pension pot in a SIPP must be totally protected.

Yikes.

So the option is multiple SIPPs, or finding a vehicle as close to cash when the time comes.

Thanks for the tip. That's something that needs to be considered.

As for the third party risk side on the hedging transaction....yep, you would have to be careful. Or should. In any event, the 'hedge' should be fairly small at anyone time - something like 10% of the pot on value on either side, and trying to 'capture' some percentage in the right direction before closing the deal. It's a pretty outlandish idea anyway. Anyone who chooses to do it would have to have big balls, and are probably the sort to put caution to the wind when considering the 3rd party risk.

Re the hedging I should perhaps explain why problems are probably more in my mind more than others.

I gamble and used to arbitrage a bit between two betting exchanges, Sporting Options and Betfair. Sporting Options went bust overnight and about £10k that was supposed to be in a segregated account (that wasn't) went poof. Luckily I got it back as a commission rebate from Betfair over a period of time. I was fortunate I had no outstanding positions that could have meant a loss at Betfair for a bet that wouldn't be paid at Sporting Options.

Since then a horse called Voler La Vedette was available at 29.00 for lots of money during a race on Betfair. In the course of the race I had well in excess of five figures on it and when it won, I was supposedly £1/2m in profit. The horse's price pre-race was 3.00 and people were backing it at 29.00 on Betfair and arbing it at up to 11.00 on another exchange called Betdaq. Betfair didn't pay out and voided all bets because they said the 29.00 was a glitch! However at Betdaq all the bets stood, so those laying at 11.00 lost a lot of money. I had also been tempted to arb the 29.00 but the alarms bells started ringing, so had no loss or £1/2m gain!

[VeryMeanReversion]

Re the hedging I should perhaps explain why problems are probably more in my mind more than others.

I gamble and used to arbitrage a bit between two betting exchanges, Sporting Options and Betfair. Sporting Options went bust overnight and about £10k that was supposed to be in a segregated account (that wasn't) went poof. Luckily I got it back as a commission rebate from Betfair over a period of time. I was fortunate I had no outstanding positions that could have meant a loss at Betfair for a bet that wouldn't be paid at Sporting Options.

It's these kind of stories and insider details from a friend working at one of those type of companies that put me off anything that hasn't got high level of legal protection. Also, the simpler the investment the better. I'm not convinced by ETF/ETCs either, I'm just waiting for excuses like "we didnt bother to buy the underlying investment, it was just a piece of paper, sorry, won't do it again, honest".

My own position is :

1. 60% House equity (good UK property law - I'm the owner occupier)

2. 32% FTSE held in SIPP @32% (good laws protecting this - low enough levels of corruption or complete failures but it does happen. Confiscation unlikely)

3. 8% Cash (held in SIPP accounts under protected limits).

The older I get, the more I learn that complex investments are used to hide information and create skimming/fraud/high-cost opportunities, all against my interests. It really does make sense why many people went for BTL as a safe pension. They just didn't understand what a risk they were taking with all that leverage. I have a small amount of leverage on my house as my LTV is ~20%.

[jiltedjen]

So your missing gold and gilts to have a decently diversified portfolio

[Errol]

ETFs are inherently risky. I wouldn't use them for anything other than short/medium term plays. And I would only put money into them that I didn't mind losing (hence my positions in GDX, GDXJ etc - I'm prepared to lose it all and have no illusions about the nature of ETFs).

Edited July 1, 2016 by Errol

[R K]

So your missing gold and gilts to have a decently diversified portfolio

What does that even mean?

Do you have any evidence gold & gilts increase long term performance? If not, are you only interested in short term performance? Volatility?

What problem are you attempting to solve?

Re VMR & ETFS - Depends. Some are fully replicated with underlying. FTSE 100 for instance. Just like a unit trust/fund. Some use swaps against an index, hence counterparty risk. i.e. inverse, X2, commods etc.

[R K]

ETFs are inherently risky. I wouldn't use them for anything other than short/medium term plays. And I would only put money into them that I didn't mind losing (hence my positions in GDX, GDXJ etc - I'm prepared to lose it all and have no illusions about the nature of ETFs).

Explain why/evidence or dont post cr4p like this Errol.

Why are they "inherently risky"? What risk? how have you quantified that risk? What academic research are you relying upon?

If all you want to do is troll every thread that doesnt say "buy gold" then youre wasting everyones time including your own.