Safer investments

Pobby

I`ve seen it said here that there are investments that sit between cash savings and equity investments.Could anyone kindly point me to a site that may tell me a little more please?

Stonk

This might be referring to gilts. They are bonds issued by HM Government, hence have negligible credit risk. Search google for "gilts".

Mind you, I think you can get a better return from the top-paying personal savings accounts than from gilts at the moment.

So perhaps it's referring to bonds issues by strong companies. I'm not sure whether these are necessarily less risky that buying shares of the company.

dunstonh

commercial property (bricks and mortar), corporate bonds, other bonds, global bonds are all low risk as well when purchased within in funds (with a few exceptions)

Debt_Free_Chick

You might find this guide helpful. It's produced by AXA, but covers the basics of investment, including different asset classes.

Oompa_Lumpa

DFC, thanks for posting that link. The thing that surprises me is how fixed interest has peformed just a little worse than property - instinctively I would have thought that property would have performed way better than fixed interest over the past 20 years.

Does anyone know where inflation would appear on the chart on page 14 and 15 over the 20 years?

dunstonh

Property has suffered periodic price crashes and periods of limited growth. During that time, fixed interest etc would have continued to plod along.

Many people have short memories and assume that property prices only go in one direction. Which is why diversification when investing is so important.

Debt_Free_Chick

Oompa_Lumpa wrote:

Does anyone know where inflation would appear on the chart on page 14 and 15 over the 20 years?

RPI (All items) was "100" in January 1987 and 194 in December 2005 so it would be a reasonably steady line, probably always slightly above cash, up to roughly the 200 mark on page 15.

HTH

Oompa_Lumpa

dunstonh wrote:

Many people have short memories and assume that property prices only go in one direction. Which is why diversification when investing is so important.

Tell me about it. I live in Northern Ireland and we have witnessed enormous growth over the past 3 or 4 years in house prices(from memory it's been something like 15% pa over this time).

This has resulted in a huge amount of people getting into the B2L market recently. I just can't justify myself getting involved in the market at this time as those rates of growth are not maintainable and I'm sure that we are a lot closer to the top of the cycle than the bottom.
However, the reply that B2L investors give me to that is, "yes, we won't see the same growth in the next few years but house prices aren't going to fall in NI - therefore you have nothing to lose".

Maybe I'm cross with myself that I didn't jump on board the "capital growth" train a few years ago, but there's no way I'm going to jump on board today with the market the way it is.
(Wait til you see the market continuing to grow at 10% for the next few years now........)

Debt_Free_Chick

Oompa_Lumpa wrote:

DFC, thanks for posting that link. The thing that surprises me is how fixed interest has peformed just a little worse than property - instinctively I would have thought that property would have performed way better than fixed interest over the past 20 years.

But bear in mind that Property, in this context, means commercial property, not residential. From an investment point of view, the possibility of the increase in capital is a secondary objective - primarily, you would hold commercial property because of the rental income it produces. In this context, property is more like fixed interest - but a slightly higher risk due to the possibility of the property being un-let and therefore generating no rent. In addition, you (or the property fund) have to absorb some of the costs of owning the property, although maintenance is usually down to the tenant (on a "fully repair/renewal" clause).

Regards

Oompa_Lumpa

Debt_Free_Chick wrote:

RPI (All items) was "100" in January 1987 and 194 in December 2005 so it would be a reasonably steady line, probably always slightly above cash, up to roughly the 200 mark on page 15.

HTH

DFC, don't know why but the summary for cash on Page 15 says "cash has outpaced inflation over the long haul, but has hard a hard time doing so".

Debt_Free_Chick

Oompa_Lumpa wrote:

DFC, don't know why but the summary for cash on Page 15 says "cash has outpaced inflation over the long haul, but has hard a hard time doing so".

Probably because I used the period from Jan 1987 and their chart uses Jan 1986. It might seem a trivial difference of only one year, but if you imagine stretching my line back then it would probably would be much closer to cash.

But bear in mind, that cash returns are subject to income tax, so the actual return achieved would be lower than that shown on the chart, for a tax-paying investor.

Regards