Jump to content
House Price Crash Forum
pweil

Safest Place For Str Fund

Recommended Posts

Hi all,

The missus and I are STRing and will be coming into a fair bit of wodge soon. (>100k mark)

The main problem for us is trying to find somewhere that we consider safe enough not to go under! Keeping in mind the £35,000 per institution rule, where have other people put their cash? Also trying to keep this well shielded from the taxman too...

I'm trying to figure out how much confidence I have in this government paying out on the FSA's £35k guarantee if things went horribly wrong...and how long such a pay-out might take...

.....

Will be maxing out Cash ISAs soon, so consider that out of the picture.

NS and I are pretty much guaranteed, but the interest rates aren't all that hot. Not sure I'd touch premium bonds, given the statistically likely poor pay-out (See article on moneysaving expert for more info, if you're bothered...)

Northern Rock are pretty much guaranteed also, from what I can see :-)

All advice and thoughts appreciated.

P

Share this post


Link to post
Share on other sites

OK, here are some ideas for you, I hope you will find them useful.

First rule is to diversify your portfolio, it is not wise to keep all eggs in one basket, and in your case to keep all money in cash savings and bonds. Instead diversify your investments and invest in these 3 core asset classes: a) cash; B) stocks and shares; c) property.

Here is how you could do this wisely.

Cash:

1. Invest in a ISK money market fund in Iceland - those funds yield 16% per annum without risk (apart from the exchange rate rate risk GBP/ISK). To open such account, you need to get a Kenitala (Icelanding social security number), Kaupthing bank will arrange it for you - just contact them and say you'd like to open a custody account with them (kaupthing.net), they will give you instructions. Once you have Kenitala you can invest in a ISK money market fund with any bank in Iceland (not necessarily Kaupthing). You will get a safe 16% a year and your only risk is that Icelandic Krona (ISK) will drop to sterling (GBP) more than 10% a year every year, which is unlikely. On the other hand, should the Krona strengthen to pound, you will earn much more than 16%!

2. Open a savings account in Australian dollars - the interest rate you can get exceeds 10% per year and the currency is likely to increase in value. Australia exports lots of commodities to China and Asia and has strong fundamentals as opposed to the UK. You can easily open a 10% savings bond with ICICI Bank Singapore via the internet and post (google ICICI bank Singapore).

3. Keep some cash in sterling - open a bond in the same bank (ICICI Singapore) that pays over 8% per annum on their 3 year bond, alternatively a 7.10% bond in Landsbanki Guernsey. With the ICICI you have the advantage that your savings are in Singapore - that means the bank will not report you to HMRC (regarding tax on the interest).

4. Open a few "regular saver" acounts with some UK banks as they offer some of the best interest rates, i.e. Alliance & Leicester pays 12% p.a. and Abbey pays 10%. But you can pay up to £250 every month, so best if you have 3 or 4 of those. Find the best ones on moneysupermarket.com

Stocks and Shares:

1. Although we are now in the bear market, there are many good investments available on the stock market. Do your research on www.iii.co.uk and find 4 to 5 stocks from different sectors that: a) are large companies; B) have stable profits year after year; c) pay high dividends above 5% per year (i.e. if the stock costs 100p it needs to pay over 5p in dividend); d) have good P/E ratio (below 15). Once you choose your companies, don't invest everything at once. Buy a little bit once every two weeks or every month, if you have 20K to invest, buy £2000 worth of stocks once every month for 10 months. In this way you will reduce the risk of buying too high as those stocks that you will buy higher will be compensated by those that you will buy lower.

2. Invest in Hong Kong and Taiwanese stocks. Here is why: both Hong Kong and Taiwan have their currencies pegged with the US dollar so their interest rates have to be in pair with the USD (i.e. very low). But the economic situation in HK and Taiwan is completely different to that in the USA - they have strong growth and very high inflation while US goes through recession. People in HK/Taiwan can take loans at 3% p.a. while inflation is 7-10% - in such scenario it is no brainer to take massive loans and save as little as possible (and spend more money) which is good for the local companies which make huge profits. So find a stock brocker in Hong Kong or Taiwan, select and buy there 4-5 companies based on the criteria in point 1, and i can almost guarantee that within 3 years you will be at least 50% better off.

3. Gold is now a good commodity to invest in and it goes up in value quickly. But the problem with gold is that unlike stocks, property or cash, it produces no income. Gold will pay you no interest, dividends or rent... But, if you are smart, you can have both - gold and income. How?

Buy stocks of the gold mining companies. They make profits, which they pay as dividends to their shareholders, while price of their shares are hugely determined by the price of gold. In that way you can kill two birds with one stone.

Property:

1. Perhaps you did not think about investing in property when you were selling your home, in the end of the day you have escaped from the falling market. But I strongly suggest you reconsider it. There are some excellent property investments available, e.g. auction property. I have been going to auctions for some time now and I have seen commercial premises producing £5,500 per year sold for £18,000!!! That's almost 30% per year in rent alone. You can get fantastic investments on auctions, from cheap residential council flats that produce 12-25% per year, to shops and other commercial premises that produce between 15 to 30% annualy! Go to www.propertyauctions.com and choose properties that produce significant income, go to auctions and bid on them. Buy in cash and remortgage later on good terms (i.e. 60% LoanToValue) - you will pay 6% mortgage but tennants will pay you over 15% in rent!!!

2. Look abroad for great opportunities, e.g. Germany. I am not sure whether you are aware that you can get a modern 45 square metre apartment in Berlin for £25K or a whole block of 15 peroid flats for refurbishment in Leipzig for £20K... Go, check yourself on the internet: www.immobilienscout24.de (German equivalent to rightmove). Germany is the world's biggest exporter, the largest economy in EU and average earnings are higher than in the UK. You can easily buy flats between € 15K and € 40K that are already rented out for years and produce 10-15% per year plus the growth potential. I suggest Berlin, Dresden and Leipzig (3 largest cities). Germany is now at the bottom or very soon after the bootom of the cycle - quite opposite to the UK as we are just after the top.

Whether or not you will use my tips, good luck with your investments!

Deos

Edited by Deos!

Share this post


Link to post
Share on other sites

Deos

Wow!

Thats a whole heap of ideas. All of which look worth researching further. You must be nearly full time on this stuff!

There were some mutterings about Icelandic banks a while back - is there a problem with recovering money invested with them if they go south?

I certainly have a lot more reading to do. Thanks for the post!

P

Share this post


Link to post
Share on other sites
OK, here are some ideas for you, I hope you will find them useful.

First rule is to diversify your portfolio, it is not wise to keep all eggs in one basket, and in your case to keep all money in cash savings and bonds. Instead diversify your investments and invest in these 3 core asset classes: a) cash; B) stocks and shares; c) property.

Here is how you could do this wisely.

Cash:

1. Invest in a ISK money market fund in Iceland - those funds yield 16% per annum without risk (apart from the exchange rate rate risk GBP/ISK). To open such account, you need to get a Kenitala (Icelanding social security number), Kaupthing bank will arrange it for you - just contact them and say you'd like to open a custody account with them (kaupthing.net), they will give you instructions. Once you have Kenitala you can invest in a ISK money market fund with any bank in Iceland (not necessarily Kaupthing). You will get a safe 16% a year and your only risk is that Icelandic Krona (ISK) will drop to sterling (GBP) more than 10% a year every year, which is unlikely. On the other hand, should the Krona strengthen to pound, you will earn much more than 16%!

2. Open a savings account in Australian dollars - the interest rate you can get exceeds 10% per year and the currency is likely to increase in value. Australia exports lots of commodities to China and Asia and has strong fundamentals as opposed to the UK. You can easily open a 10% savings bond with ICICI Bank Singapore via the internet and post (google ICICI bank Singapore).

3. Keep some cash in sterling - open a bond in the same bank (ICICI Singapore) that pays over 8% per annum on their 3 year bond, alternatively a 7.10% bond in Landsbanki Guernsey. With the ICICI you have the advantage that your savings are in Singapore - that means the bank will not report you to HMRC (regarding tax on the interest).

4. Open a few "regular saver" acounts with some UK banks as they offer some of the best interest rates, i.e. Alliance & Leicester pays 12% p.a. and Abbey pays 10%. But you can pay up to £250 every month, so best if you have 3 or 4 of those. Find the best ones on moneysupermarket.com

Stocks and Shares:

1. Although we are now in the bear market, there are many good investments available on the stock market. Do your research on www.iii.co.uk and find 4 to 5 stocks from different sectors that: a) are large companies; B) have stable profits year after year; c) pay high dividends above 5% per year (i.e. if the stock costs 100p it needs to pay over 5p in dividend); d) have good P/E ratio (below 15). Once you choose your companies, don't invest everything at once. Buy a little bit once every two weeks or every month, if you have 20K to invest, buy £2000 worth of stocks once every month for 10 months. In this way you will reduce the risk of buying too high as those stocks that you will buy higher will be compensated by those that you will buy lower.

2. Invest in Hong Kong and Taiwanese stocks. Here is why: both Hong Kong and Taiwan have their currencies pegged with the US dollar so their interest rates have to be in pair with the USD (i.e. very low). But the economic situation in HK and Taiwan is completely different to that in the USA - they have strong growth and very high inflation while US goes through recession. People in HK/Taiwan can take loans at 3% p.a. while inflation is 7-10% - in such scenario it is no brainer to take massive loans and save as little as possible (and spend more money) which is good for the local companies which make huge profits. So find a stock brocker in Hong Kong or Taiwan, select and buy there 4-5 companies based on the criteria in point 1, and i can almost guarantee that within 3 years you will be at least 50% better off.

3. Gold is now a good commodity to invest in and it goes up in value quickly. But the problem with gold is that unlike stocks, property or cash, it produces no income. Gold will pay you no interest, dividends or rent... But, if you are smart, you can have both - gold and income. How?

Buy stocks of the gold mining companies. They make profits, which they pay as dividends to their shareholders, while price of their shares are hugely determined by the price of gold. In that way you can kill two birds with one stone.

Property:

1. Perhaps you did not think about investing in property when you were selling your home, in the end of the day you have escaped from the falling market. But I strongly suggest you reconsider it. There are some excellent property investments available, e.g. auction property. I have been going to auctions for some time now and I have seen commercial premises producing £5,500 per year sold for £18,000!!! That's almost 30% per year in rent alone. You can get fantastic investments on auctions, from cheap residential council flats that produce 12-25% per year, to shops and other commercial premises that produce between 15 to 30% annualy! Go to www.propertyauctions.com and choose properties that produce significant income, go to auctions and bid on them. Buy in cash and remortgage later on good terms (i.e. 60% LoanToValue) - you will pay 6% mortgage but tennants will pay you over 15% in rent!!!

2. Look abroad for great opportunities, e.g. Germany. I am not sure whether you are aware that you can get a modern 45 square metre apartment in Berlin for £25K or a whole block of 15 peroid flats for refurbishment in Leipzig for £20K... Go, check yourself on the internet: www.immobilienscout24.de (German equivalent to rightmove). Germany is the world's biggest exporter, the largest economy in EU and average earnings are higher than in the UK. You can easily buy flats between € 15K and € 40K that are already rented out for years and produce 10-15% per year plus the growth potential. I suggest Berlin, Dresden and Leipzig (3 largest cities). Germany is now at the bottom or very soon after the bootom of the cycle - quite opposite to the UK as we are just after the top.

Whether or not you will use my tips, good luck with your investments!

Deos

Here is how you could do this wisely.

Cash:

1. Invest in a ISK money market fund in Iceland - those funds yield 16% per annum without risk (apart from the exchange rate rate risk GBP/ISK). To open such account, you need to get a Kenitala (Icelanding social security number), Kaupthing bank will arrange it for you - just contact them and say you'd like to open a custody account with them (kaupthing.net), they will give you instructions. Once you have Kenitala you can invest in a ISK money market fund with any bank in Iceland (not necessarily Kaupthing). You will get a safe 16% a year and your only risk is that Icelandic Krona (ISK) will drop to sterling (GBP) more than 10% a year every year, which is unlikely. On the other hand, should the Krona strengthen to pound, you will earn much more than 16%!

Would it be possible to explain your definition of wise please?

Looking at GBPISK - it was 120 ish a year ago and is not around 155, so around 30% down. So you are gaining 16% interest but it is devalued 30% pa. Do you think the outlook is any better for Iceland going forward? The credit markets would suggest otherwise, but I'm sure you knew that.

Share this post


Link to post
Share on other sites
Would it be possible to explain your definition of wise please?

Prudent, crafty, informed and with an edge :)

Looking at GBPISK - it was 120 ish a year ago and is not around 155, so around 30% down. So you are gaining 16% interest but it is devalued 30% pa. Do you think the outlook is any better for Iceland going forward? The credit markets would suggest otherwise, but I'm sure you knew that.

Yes, the krona is down and credit markets are shaky. But the currencies fluctuate all the time. Please take a look at some long term GBP/ISK charts, you will see that there also many years of ISK strenghtening to the pound. Krona is very volatile due to small Icelandinc economy, but the recent drop in ISK value does not mean that the Icelandic currency will be losing value forever. I would risk to say actually the contrary - that now is a good chance of buying ISK very cheap.

Many of you here recommend buying euros, but what if euro suddenly drops 30% to pound? Impossible? 30% is only a fraction of what USD lost to GBP. Instead of investing in another fiat currency such as euro I reccommend ISK as at least it pays high interest - euro will not compesate you the loss if it falls 30% as its interest is only 4%.

But should you regard ISK as unstable, there is also Australian Dollar which may be a safer bet (although potentially a bit less rewarding).

Share this post


Link to post
Share on other sites

I can't believe I am reading positive responses to this utterly ridiculous investment advice! Icelandic banks??? 16% "guaranteed"??? WTF!

HK and Taiwan doing well because they got into the same scam the UK housing market did??? WTF!

Fifteen "period flats" - whatever that is - in Leizig for 20k???? WTF!

There we have so-called savvy non-BTLers who sold up in time, only to be suckered into investing their money in other highly inflated bubbles.

Come on!

Just get used to your 5% a year return on investment in the stock market and you might be pleasantly surprised.

Share this post


Link to post
Share on other sites
Prudent, crafty, informed and with an edge :)

Yes, the krona is down and credit markets are shaky. But the currencies fluctuate all the time. Please take a look at some long term GBP/ISK charts, you will see that there also many years of ISK strenghtening to the pound. Krona is very volatile due to small Icelandinc economy, but the recent drop in ISK value does not mean that the Icelandic currency will be losing value forever. I would risk to say actually the contrary - that now is a good chance of buying ISK very cheap.

Many of you here recommend buying euros, but what if euro suddenly drops 30% to pound? Impossible? 30% is only a fraction of what USD lost to GBP. Instead of investing in another fiat currency such as euro I reccommend ISK as at least it pays high interest - euro will not compesate you the loss if it falls 30% as its interest is only 4%.

But should you regard ISK as unstable, there is also Australian Dollar which may be a safer bet (although potentially a bit less rewarding).

Yeah, and the Icelandic Krona - or whatever it is called - and the Australian dollar are non-fiat currencies, backed by such mainstays as gold, silver, uranium, bear-skin, kangaroo-leather, hardcore-porn, and crap TV-shows.

Come off it mate.

Share this post


Link to post
Share on other sites

I don't know about the Icelandic Krona. This strikes me as a high risk investment.

The ISK is extremely weak, mainly because the entire world fears the icelandic banking sector, which is regarded as one of the most toxic on the planet. The prices for CDS 'insurance' at banks like Kaupthing and Glitnir, are astronomical. Indeed, as the depth of the current economic crisis have begun to become apparent, the ISK has suffered horrific devaluation - worse even that the GBP and USD.

Now, a fair amount of this drop has been due to speculation and 'shorting' of the currency. And, conversely, the Icelandic goverment have said that they will 'hurt the speculators', and have raised interest rates to 15% in order to try to preserve the value of the currency. Although, this has arrested the decline, it hasn't really strengthened the currency by attracting investors into it. The risk is that the banks there deteriorate financially, and it becomes apparent that the ISK is overvalued, and more importantly, the government runs out of ammunition (economic activity vs. interest rates, foreign currency reserves, gold, etc.) to support it. Iceland is facing high inflation, it has a generally weak economy, the banks are heavily invested in the US and other 'bubble markets' - the high interest rate is crushing them, it's uncertain if the govt will be able raise it much higher, if money starts to leave iceland.

The UK government tried exactly this. There was intense speculation against the GBP. Interest rates got hiked to 15% to try and scare the speculators away. They came back in force. Govt started buying the currency. Speculators kept selling. Govt realises that even completely draining the country of foreign currency and gold isn't going to kill the speculators. Govt admits defeat. GBP drops 20% in one day.

Share this post


Link to post
Share on other sites

It is true that all investments, including Icelandic Krona, German property and domestic Taiwanese companies carry risk. But putting your money into a "non-risk" 5% p.a. government bonds is a certain loss. British money devalues at a faster rate than 5% p.a.

There are no investments that do not carry any sort of risk. Bonds / savings accounts are NOT investments, contrary to the common belief. Neither your house is an investment (unless you rent a room out or use it for some business purposes).

In history, the worst times have been almost always the best times to invest. Buy low, sell high - you all heard that many times - so this rule to be rubbish, advising to sell low and buy high. Icelandic Krona is weaker than ever and Iceland has very bad PR nowadays, especially in the "mainstream" investment circles... Nobody would now invest there, people are saying how bad Iceland is, how weak the economy, all worst scenarions will certainly happen there. That's the common opinion. All what you can now read about Iceland is "economy to go bust, currency to plummet, country to go bankrupt etc.). Those news are everywhere, and you think all this is not priced in Krona? Now is the time to buy - some that have invested earlier already did panic and sold all their Icelanding holdings, everyone has been selling short the ISK and even the Icelandinc government has been loading up their currency reserves in the mean time quietly. Now is the time to invest - ISK is at bottom low and pays huge interest. Of course it can still go even lower if some unexpected bad news come, but so does sterling - and you only get 5% on sterling.

Property in Germany: they produce very good rental returns, between 7% and 12% per annum after all costs, and that is why they are very good investment. You can get a modern flat in nice area for 20-30K. I mentioned that there are many older block of flats in need of refurbishment available in Leipzig for 20K-50K but I do not recommend them to those who do not know much about property development and don't have an idea on how to refurbish them. Those who can refurbish them cheaply, those blocks can provide an excellent chance of constant huge rental income in many years to come.

Why Taiwanese and Hong Kong shares are currently a great investment I have explained earlier, and I can't see from your mumbling what is actually your argument. The moment to sell HK and TW shares would be when US Fed raises significantly USD interest rates and when US dollar gets much stronger. It is not happening now and will not be happening soon, plus shares in both HK and Taiwan cost now much less than they did (partly due to the Western capital withdrawing from there). And they are cheaper in their own weakening currencies pegged to USD, in real terms they are much cheaper than they look! Now is the time to buy, just slowly, month by month, bit by bit - only good, strong companies with much exposure to domestic markets that pay large dividends. They are making huge profits and profits will be much higher if Fed leaves rates on hold.

If you think any of the above is rubbish, you can obviously stick to your 5%-more-GBPs-every-year before inflation and tax and keep losing what you have earned. This way you will have a 100% guarantee that you will lose some of the value of your STR fund. Or better, keep them in cash or bury in your cellar. But don't be shocked if they become worthless one day.

But for all those that like a little risk and want to profit from the current world economic situation, I reccomend diversifying their money into a number of safer and riskier investments that produce constant income. In this way you at least give yourself a large chance of not losing your money, or better, make some significant profits - which I wish you all.

And just for your information, actually I do put my money where my mouth is.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 395 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.