SIPP - The "nuclear" option....

peterg1965

This is a bit of thinking outloud, so bear with me please...

It is a tricky time right now in the most volatile stock market I have seen for quite a while, at least in 2008 it went down and down, before it started to head up and up in 2009/10. Now it is up and down then down and down and up on a daily basis.

I have seen most of my gains wiped out in my SIPP funds, most frustrating, but I know it's a long game. I keep having a thought go through my head, having watched the big banks (BARC, LLOY and RBS) share prices plummet over the last 4/5 weeks. Should I sell my entire OEIC and Share SIPP portfolio - about £72K now, wait until RBS is under 20p again and buy up £72K worth of RBS shares?

Thought process:
- I think the Share price will go down again, particularly now that the US FHFA are trying to sue 17 banks for $30Bn - which includes RBS.
- RBS will not go bankrupt, can it? It is 90% owned by the UK taxpayer, so if it went belly up it would be like the BoE going under, wouldn't it?
- Although the balance sheet is dysfunctional, Stephen Hester is slowing sorting it out, although exposure to PIIGS sovereign debt will hold it back.
- It is essentially a profitable high street back again if it were not for the PPI set aside.
- If I buy in at under 20p, surely a target price for this bank in the medium/long term is 60p+

Please confirm that I am mad to think this.

Lokolo

20p share price still means it can lose 20p.

Eggs, 1 basket.

JoeCrystal

peterg1965 wrote: »

Please confirm that I am mad to think this.

Confirmed, you are mad to think of this!

peterg1965

That is the responses I thought this idea would generate! A tempting option if there was not so much to lose. I know I will be kicking myself when the RBS sp recovers to 40p+, but better safe than sorry I suppose.

ermine

have you ever heard of the concept of diversification? At the moment you might as well have the fun from the plans of what to do your 72k - get a ticket to Vegas and put it all on red...

It's not like it's just banks that are feeling the heat at the mo. There's much to be said for buying when stocks are down, but not if you have to sell other stocks that are down to do it!

atush

There is nothing to stop you buying SOME RBS shares if they drop really low. AS a contrarian investor I can understand this.

what none of us can understand is your fixation with just one share for all your money and the risk that carries. You could lose 35K of that 72K quite easily- are you prepared for that?

dunstonh

Playing roulette with your future is not a sensible thing to do.

Remember what happened to B&B and Northern Rock? Lots bought their shares when they thought they were low priced. RBS could still follow.

peterg1965

I get all the diversification thing, my SIPP has about 20 funds in it, including some shares, and my SIPP PR has about 18 funds. This SIPP is in addition to a generous DB occupational scheme, however, there is a fair bit riding on the SIPP performance over the next 9 years.

I will NOT be doing as I originally suggested, but I may consider selling some of the funds and buying a decent wedge of RBS shares if the price dips.

As for risk, it is a high risk strategy, BUT RBS is a publicly owned bank and it cannot fail so it is not like putting it all on 'red', it's not 50:50 gambling.

Lokolo

peterg1965 wrote: »

I get all the diversification thing, my SIPP has about 20 funds in it, including some shares, and my SIPP PR has about 18 funds. This SIPP is in addition to a generous DB occupational scheme, however, there is a fair bit riding on the SIPP performance over the next 9 years.

I will NOT be doing as I originally suggested, but I may consider selling some of the funds and buying a decent wedge of RBS shares if the price dips.

As for risk, it is a high risk strategy, BUT RBS is a publicly owned bank and it cannot fail so it is not like putting it all on 'red', it's not 50:50 gambling.

You should also think about what the government will do when they want to sell their part in the bank, as this could have a massive impact on the share price.

peterg1965

Lokolo wrote: »

You should also think about what the government will do when they want to sell their part in the bank, as this could have a massive impact on the share price.

The Governments 'break even' price on RBS is about 50p a share, I believe. Whenever that happens, that is twice the current SP. I doubt whether UKFI will offload it's (our) 90% stake in one go and it has yet to be decided the mechanism to do that. There are hair brain schemes such as Nick Glegg's 'give everyone a stake' and there is also the possibility of RBS partially buying itself out of UKFI once its balance sheet becomes healthier.

iwalker147

I held railtrack shares, they dissolved, from an all time high of about 1700pence - don't assume RBS will recover anytime soon - whilst they're all building up their cash reserves their share price wont recover very much because there's no imminent prospect of profits!

I bought Lloyds shares once upon a time when they were at 500p, and the dividend was 6% - great, but if I'd done it 2 years later I'd have lost £20,000.

Bear in mind that RBS may incur extra costs etc when they split corporate and personal banking divisions.