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Have you ever gone: I've got enough and so am getting out of equities?
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North Star
Posted: 11 December 2023 16:48:44(UTC)
#21

Joined: 22/05/2014(UTC)
Posts: 438
Keith Cobby;289234 wrote:
Agree that Bankers has been disappointing recently and, as we all know, a recent drop in performance affects cumulative performance. Bankers has a lower proportion in the US than most of the other global trusts. In my experience there have been times when the large global trusts have been ahead and behind each other, for example ATST has had a good run recently. Obviously, your entry point is a big factor but I think holding for the long term often smooths out performance. Of course, if you are not prepared for periods of underperformance against the index (currently US heavy), then your holdings must reflect this.


In this tech era the US has definitely been a winner & currently the UK only represents 4% of the world index and I can't see that changing much in the next few years. The Far- East has had a bad time as well which hasn't helped a long-term investments in global IT's.
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ben ski
Posted: 11 December 2023 18:22:09(UTC)
#22

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While inflation-linked gilts are available on positive yields, it makes a LOT of sense to buy these at various durations to almost guarantee positive real returns for decades to come.. This may be a very temporary situation.

I'd still own some equities, foreign bonds and gold – diversification is the only real safety, but IL gilts and TIPS are as close as it gets for individual assets (bearing in mind a likely looming debt crisis – the outcome of which will probably be money printing, possibly more inflation, hence: inflation-linked bonds).
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7 users thanked ben ski for this post.
Guest on 11/12/2023(UTC), Sara G on 11/12/2023(UTC), North Star on 11/12/2023(UTC), Guest on 12/12/2023(UTC), Kevin Crane on 17/12/2023(UTC), ALAN P on 17/12/2023(UTC), kim shillinglaw on 30/12/2023(UTC)
SF100
Posted: 11 December 2023 20:32:17(UTC)
#23

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'almost guaranteed' is perhaps a bit too optimistic.
As I understand it, those gilts are not inflation-linked.
They are index-linked.
The index used to be taken as RPI....and now it's not (as of 2030).
(... and so it may follow...)
The index used to be taken as CPIH..and now it's not (as of _insert date_)
The index used to be taken as.....

Why do we want to be holding the debt of governments who can't afford to pay off their debt?
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3 users thanked SF100 for this post.
Sara G on 11/12/2023(UTC), Captain Slugwash on 12/12/2023(UTC), kim shillinglaw on 30/12/2023(UTC)
Thrugelmir
Posted: 11 December 2023 20:38:57(UTC)
#24

Joined: 01/06/2012(UTC)
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SF100;289255 wrote:

Why do we want to be holding the debt of governments who can't afford to pay off their debt?


Would you be wanting to hold equities either in these economies?
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Guest on 12/12/2023(UTC), kim shillinglaw on 30/12/2023(UTC)
Sara G
Posted: 11 December 2023 21:56:41(UTC)
#28

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Thinking about it, while I don't accept that there's a fixed point at which equities no longer make sense, there may be a case for tweaking allocations to reduce risk... So perhaps risky punts are no longer necessary to boost returns, whether that be regions with heightened political risk, or small positions in micro caps with positive asymmetric risk / reward potential that don't move the needle...

Regarding IL bonds, I was too early, but longer term I agree with Ben Ski that there is a very strong case to buying now. Counter-intuitively perhaps, there's also a strong case for buying conventional bonds, if you believe that interest rate cuts are on the way. I'd thought that IL and conventional bonds would be (to some extent) inversely correlated, but clearly both are influenced by base rates primarily.
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9 users thanked Sara G for this post.
Jay P on 11/12/2023(UTC), Guest on 11/12/2023(UTC), Tim D on 11/12/2023(UTC), Rookie Investor on 11/12/2023(UTC), ben ski on 11/12/2023(UTC), NoMoreKickingCans on 11/12/2023(UTC), Guest on 12/12/2023(UTC), Kevin Crane on 17/12/2023(UTC), kim shillinglaw on 30/12/2023(UTC)
Rookie Investor
Posted: 11 December 2023 22:38:58(UTC)
#29

Joined: 09/12/2020(UTC)
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Sara G;289260 wrote:
Thinking about it, while I don't accept that there's a fixed point at which equities no longer make sense, there may be a case for tweaking allocations to reduce risk... So perhaps risky punts are no longer necessary to boost returns, whether that be regions with heightened political risk, or small positions in micro caps with positive asymmetric risk / reward potential that don't move the needle...

Regarding IL bonds, I was too early, but longer term I agree with Ben Ski that there is a very strong case to buying now. Counter-intuitively perhaps, there's also a strong case for buying conventional bonds, if you believe that interest rate cuts are on the way. I'd thought that IL and conventional bonds would be (to some extent) inversely correlated, but clearly both are influenced by base rates primarily.


I like to think linkers as a spread product - so the difference between the nominal yield and inflation is what drives the prices every day. Whereas a nominal you just get exposed to moves in the nominal yield, so a directional product.

So this can hide the risk for the uninitiated (similar to if you go long stock A and short stock B by the same amount, but you most certainly are taking risk), amplified by the fact that linkers have a higher rate sensitivity (duration) compared to equivalent maturity nominal bonds - due to their lower coupons and inflation accrual at maturity.

Of course, if you are just planning to hold to maturity, the interim volatility shouldn't make a difference. And might even present an opportunity to buy at cheaper prices if you always wanted to increase allocations, but had to wait patiently for the right price.
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Sara G on 12/12/2023(UTC)
ben ski
Posted: 11 December 2023 22:53:18(UTC)
#25

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SF100;289255 wrote:
'almost guaranteed' is perhaps a bit too optimistic.
As I understand it, those gilts are not inflation-linked.
They are index-linked.
The index used to be taken as RPI....and now it's not (as of 2030).
(... and so it may follow...)
The index used to be taken as CPIH..and now it's not (as of _insert date_)
The index used to be taken as.....

Why do we want to be holding the debt of governments who can't afford to pay off their debt?


That's the difference between inflation as a concept and how you quantify inflation.

It's extremely unlikely the UK or US would default on £/$ debt, because they control the printing of money in which it's denominated.. The risk then becomes if devaluing cash fuels inflation, which is where the safety feature of IL bonds kicks in
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Guest on 12/12/2023(UTC), Jay P on 12/12/2023(UTC)
Codger
Posted: 12 December 2023 06:49:07(UTC)
#30

Joined: 21/12/2011(UTC)
Posts: 6

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How old are you and your partner?
What are you going to spend the money on?
Realistically, you are unlikely to want expensive holidays when you are in your eighties if you ever get there.
If you’re sure you have enough money, consider giving away the surplus. If you have children, they might benefit from getting money in their 30s when they need it than in their 50s.
If you’ve really got enough money and don’t want to give away the surplus, put it in a global tracker and forget it. Your heirs might get a pleasant surprise.
Ps my main thought is that wealthier people hold on to their money for too long!
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4 users thanked Codger for this post.
MBA MBA on 12/12/2023(UTC), Mike Halladay on 12/12/2023(UTC), Historyman on 12/12/2023(UTC), Tim Dr on 25/12/2023(UTC)
Law Man
Posted: 12 December 2023 09:24:23(UTC)
#31

Joined: 29/04/2014(UTC)
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“Me too”. In retirement decumulation we have made our assets; now preserve them; BUT retirement is c. 30 years, so we need some Equities. It is a changing balance. Hold cash or close to cash (or Div income) to see you through the next 2 years.
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Guest on 12/12/2023(UTC), Nigel A on 17/12/2023(UTC), kim shillinglaw on 30/12/2023(UTC)
SF100
Posted: 12 December 2023 09:57:25(UTC)
#26

Joined: 08/02/2020(UTC)
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ben ski;289266 wrote:
SF100;289255 wrote:
'almost guaranteed' is perhaps a bit too optimistic.
As I understand it, those gilts are not inflation-linked.
They are index-linked.
The index used to be taken as RPI....and now it's not (as of 2030).
(... and so it may follow...)
The index used to be taken as CPIH..and now it's not (as of _insert date_)
The index used to be taken as.....

Why do we want to be holding the debt of governments who can't afford to pay off their debt?
That's the difference between inflation as a concept and how you quantify inflation.

It's extremely unlikely the UK or US would default on £/$ debt, because they control the printing of money in which it's denominated.. The risk then becomes if devaluing cash fuels inflation, which is where the safety feature of IL bonds kicks in
Is moving the goalposts not the same thing....?
It would be a bit naive of us to think we are guaranteed positive-real-yields, when the governments can just change the datum at a whim, whenever they choose to do so.
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1 user thanked SF100 for this post.
Rookie Investor on 12/12/2023(UTC)
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