best long-term investments

Thrugelmir

lvader wrote: »

Where do people put money as an alternative when bonds and gilts beyond grossly over valued?

There are bond funds that hold variable rate instruments.

atush

The problem with bo9nds and gilts is they are over valued due to QE. But shorter term ones can still be your friend.

But they are not easily found in collective funds.

jamesd

lvader wrote: »

Where do people put money as an alternative when bonds and gilts beyond grossly over valued?

Not only gilts, bonds in general at the moment, even more than shares, and globally, unlike equities.

Cash, alternative investments, other stock markets that have lower valuations. I tend to suggest overweight in Europe and UK commercial property as well as alternative investments in P2P and VCT use where appropriate.

Alternatively, options and covered warrants are permitted inside a SIPP and can be purchased to make money if a market falls to counteract the effect of a loss in the existing holdings without selling those holdings.

BeatTheSystem

jamesd wrote: »

Cash, alternative investments, other stock markets that have lower valuations. I tend to suggest overweight in Europe and UK commercial property as well as alternative investments in P2P and VCT use where appropriate.

Jamesd, have you committed any capital to VCT's as of yet?

When comparing VCT's to some P2P oppurtunities I believe that VCT's are more attractive with all of the tax advantages.

I have committed 40K to VCT's so far and very pleased with the way they are going.

I agree over commercial property and hold around 25% of liquid assets in various investment trusts.

One thing that really irks me and always has is that when the US market takes a tumble so will the UK one, even though the UK market is fairer value.

kidmugsy

BeatTheSystem wrote: »

One thing that really irks me and always has is that when the US market takes a tumble so will the UK one, even though the UK market is fairer value.

I don't know Smithers' current views on the topic, but years ago he and a colleague argued that London behaved like a particularly erratic share on Wall St.

princeofpounds

Where do people put money as an alternative when bonds and gilts beyond grossly over valued?

There is a big difference between a long-duration bond and a short-duration bond. Short-terms bonds may lose a little bit of value if rates rise but not much, because you get to reinvest at higher rates quickly. They are rather cash-like if they have a high credit rating.

Similarly inflation-linked bonds are available in some countries at some points. They aren't going to make you great real returns, and you have to accept that inflation indexes are not always that fair over the long term, but they will preserve your purchasing power vs. a market sell-off. They are expensive within their own context but they would do a better job of protection than some other asset classes in certain circumstances.

Metals and other non-income producing commodities are also an option. I'm not a gold bug, but the huge disadvantage of not producing a cashflow stream is not such a disadvantage when such income is drastically overvalued.

Absolute return strategies are also a possibility. They *should* produce returns uncorrelate to the market, which is why they are popular despite not having especially high returns, but to be honest the majority of hedge funds are not true hedged products (the term has not been used precisely for many years and probably never will be again), and discerning the difference is not easy for the average joe.

Then within asset classes you can look for less vulnerable strategies e.g. low-beta within equities. shorter duration and higher credit rating in bonds.

As for the right time to start implementing a strategy like that? No idea! But there are valid reasons to consider it these days.

kidmugsy

princeofpounds wrote: »

As for the right time to start implementing a strategy like that? No idea! But there are valid reasons to consider it these days.

One of my suspicions is that lots of people who have persuaded themselves that equivalent problems don't arise with residential property are going to end up in the soup. That applies both to BTLs and to owner-occupied.

The future is another country.

jamesd

BeatTheSystem wrote: »

Jamesd, have you committed any capital to VCT's as of yet?

Not yet. Quite likely during this year's VCT season because I may well now start to always pay the maximum I can into a pension until I retire. I have salary sacrifice with 50% employer NI saving share so that beats VCT for me at the moment until I hit the pension contribution cap. At least 38.9% combined income tax and NI relief. For basic rate income below the maximum my employer will let me sacrifice the VCT looks attractive.

Of course that's attractive for my circumstances: in excess of £100k of non-pension savings investments that I needed to support myself before reaching 55. Each year closer to 55 is one year's spending worth of that which I don't need, so can usefully use for pension or VCT purchases.

BeatTheSystem wrote: »

When comparing VCT's to some P2P oppurtunities I believe that VCT's are more attractive with all of the tax advantages.

I agree. Particularly the best known UK P2P firms.

BeatTheSystem wrote: »

I have committed 40K to VCT's so far and very pleased with the way they are going.

good! Would you mind sharing what you're using and how they have been doing on income and capital value levels?

BeatTheSystem

jamesd wrote: »

good! Would you mind sharing what you're using and how they have been doing on income and capital value levels?

Sorry for the delay, I was travelling.


From a 40K investment here are the key figures:


Capital Loss £4,991.74 (-12.48% of investment)


Dividends paid since investing £1,580.66 (narrowly missed out on approx 650 dividends). This equates to only 4% however I have not held any of the VCT's for a year yet and narrowly missed out on 8p and 6p on BMD and BNS. I expect this year to see somewhere between 6% and 8% dividends excluding the effect of tax relief.


Loss taking dividends into account £3,411.08 (-8.53%)


Tax Relief +12K


Taking tax relief and dividends into account there is a net gain of £8,588.92 (+21.47)


I have 8 VCT's, MIX, MIG, MIG4, IGV, HHV, FTV, BMD, BNS


The capital loss is attributed to bid-offer spread and some kind of loss due to buying into an existing fund (cant quantify this).


I was expecting a loss in capital value at least in year 1, one in particular (MIG) is now showing a small capital gain.


If the VCT's can recover capital values and maybe grow slightly within 5 years and consistently pay dividends circa 6-8% I will be very happy. Dividends as you know are not subject to tax which is important for a 40% tax payer.

FatherAbraham

kidmugsy wrote: »

http://blogs.ft.com/andrew-smithers/2014/08/long-term-investing/

Summary:

100% equities is the most remunerative policy, except when the markets are grossly over-valued.

Getting the biggest possible pot over infinite time is not the goal of personal-finance investment. It's not a sensible goal for anyone's retirement fund.

Taking the risk of having only one half of what one needs to live on, in order to have a chance of getting twice as much as one needs to live on is a bad gamble.

kidmugsy wrote: »

Currently the markets are grossly over-valued.

You can't know that. Not with enough certainty to make sure money out of it.

Warmest regards,
FA