Where should we put the low risk element of our portfolio?

Glen_Clark

Rollinghome wrote: »

Try googling on Google Finance instead: www.google.co.uk/finance

Doh! Ticker Code, I should have known
Thanks

gadgetmind

Glen_Clark wrote: »

Aren't they on a premium?

Personal Assets operates a tight discount control so always trades close to NAV. Ruffer is on a modest premium but on the low side historically.

grey_gym_sock

Glen_Clark wrote: »

but then keep reading about the demise of the High Street and seeing empty shops / charity shops paying low rents, and wonder if there is a good reason for the discount

retail property is probably losing out overall, due to the continued rise of internet shopping.

but then within retail, some locations are doing better than others; e.g. generally big shopping centres better than high streets (though it depends on the details).

meanwhile, there's presumably also some gain for properties used as distribution centres, etc, for all that internet shopping.

so a more mixed picture for property overall.

Glen_Clark

grey_gym_sock wrote: »

but then within retail, some locations are doing better than others; e.g. generally big shopping centres better than high streets

true because Osborne is blowing up another debt fuelled house price bubble, but since the resultant shopping is built on increasing debt it isn't sustainable much beyond the election is it?
Agree about the distribution centres but I didn't notice a fund doing those.

gadgetmind

LondonMetric is big on distribution centres but I wouldn't have this as my old holding. Across a few portfolios we also hold UKCM, TRY, BLND and also the IUKP EFT.

I also dipped into SREI at about the time of the name change and new management and exited shortly afterwards for a 20% gain.

Ark_Welder

grey_gym_sock wrote: »

why would you count ITs like Personal Assets as 100% in the low-risk part of a portfolio? don't they hold a substantial amount of equities (even if they're defensive equities)?

for instance, if they hold 40% equities, and 60% I-L bonds + gold + etc, then shouldn't you count it as 40% high risk, 60% low risk?

I count them among the lower risk element due to the low volatility and maximum drawdown that they exhibit, helped by their preparedness to invest across asset classes in an unconstrained manner. Whilst their holding are a mix of risks, the overall effect is a reduction of risk when measured by those two factors - rather like having a balanced portfolio within a single fund or two. So I can hold them and be reasonably confident that their prices are stable and won't fall by 20% over a period of a couple of months, and this does matter when a timescale has a fixed date in mind that is fast approaching.

Regarding the split between asset types, I do monitor this across the whole of my portfolio. So, for example, I have an indication of the amount of IL bond exposure that these give to me and I can decide whether I want to hold a dedicated IL bond fund to increase this further, if I have a specific view. Whilst I could try to do this myself by holding single-asset class funds, this would not give me the managers' expertise and views - which I am happy to pay for. By splitting my portfolio between funds with a similar objective I am reducing the risk that one of them gets it wrong, and I am hoping that my return will be greater than what I would have been able to achieve by progressively reallocating to bonds, as would be the usual case for a pension fund that was to be used to purchase an annuity (which is no longer the case, but that is for another thread).

IronWolf wrote: »

I would say shorter term bonds, then you are less exposed to the risk of interest rates rising.

High yield or investment grade? The former tend to be shorter maturities, but default risk is higher. Whereas the yield to maturity on the latter tends to be lower than that available on cash in some cases, and especially with gilts. And for taxpayers there is the consideration of how the yield is made up, i.e. the breakdown between coupon payments and capital gain or loss. If a bond is purchased above par then the holder is, in effect, paying income tax on their capital return (they will pay tax on the interest and then suffer a capital loss that cannot - in most cases - be offset against capital gains for CGT calculations).

Compared with cash, though, shorter term bonds do the opposite: they provide less exposure to interest rates falling. My thinking here is that if interest rates are rising, then the rates on instant access and short-notice cash accounts will also rise. But with a short term bond you still have the same yield to maturity, unless the bond is sold. But falling interest rates would lower the return on cash but not the bond.

Glen_Clark wrote: »

Just googled that and got;
RICA = Rail Industry Contractor's Association
PNL = Pacific National Laboratory :huh:

Strange. I found myself flying between Mexico and Sicily...