active vs passive?

EdGasket

Bond ladder won't help as most bonds are trading above their redemption value due to stupidly low interest rates. I prefer to make 10% or more a day in equities (though not every day )with my money protected by the FSA (but obviously not trading losses) than risk P2P lending, but each to their own.

Ryan_Futuristics

EdGasket wrote: »

Bond ladder won't help as most bonds are trading above their redemption value due to stupidly low interest rates. I prefer to make 10% or more a day in equities (though not every day )with my money protected by the FSA (but obviously not trading losses) than risk P2P lending, but each to their own.

I'd have thought short-term bonds held to maturity should be relatively safe (my own reservation is that yields just don't look attractive against risk - so I don't hold bonds - but a lot of people here still seem keen to, so they might right!)

Only 10% a day? :cool:

TheTracker

Ryan_Futuristics wrote: »

I feel P2P lending to small business (e.g. Funding Circle) is probably one of the new asset classes we've been waiting for ... I'm currently earning 10.2% interest (estimated 7.2% after fees and bad debts - still decent after tax, and soon they'll probably be available through ISAs) ... To me it's just junk bonds 2.0

It's not often I get to agree with you without caveat so I'll take any chance I get I've recently raised P2B from 3 to 5% in my portfolio. My 1 year record is 9.3% after fees but before tax and bad debt (none encountered yet in 18 months). I pass by opportunities with 10+% return. I also see it as junk bonds. I'm forced, well forced isn't quite the word, to keep a lot of cash as a result of otherwise safe retained profits of a privately held business so happy to take risk here to offset that situation.

TheTracker

EdGasket wrote: »

How the heck are you going to get a '3% real return on bonds' with rising interest rates? A most dangerous piece of advice; you will more likely lose half your capital or more in bonds over the next few years.

How is this likely? I have a bunch of bonds through ORB purchased at initial offering that I'll keep to maturity, paying anywhere from 4-8%pa. The only way I can lose half my capital is half of them go bust and I have poor creditor preference in administration.

EdGasket

TheTracker wrote: »

How is this likely? I have a bunch of bonds through ORB purchased at initial offering that I'll keep to maturity, paying anywhere from 4-8%pa. The only way I can lose half my capital is half of them go bust and I have poor creditor preference in administration.

Most government bonds (gilts) are above redemption value and hence you will make a capital loss if held to redemption. The YTR (yield to redemption) is lower than the simple yield.

Obviously if you buy an initial offereing priced at 100 and hold to maturity you won't lose anything unless the bonds default. I was talking about investing a sizeable amount of money today in bonds available in the market i.e. gilts or US treasuries.

EdGasket

TheTracker wrote: »

I've recently raised P2B from 3 to 5% in my portfolio. My 1 year record is 9.3% after fees but before tax and bad debt (none encountered yet in 18 months).

So after bad debt and tax you might end up with 5% or so depending on your tax bracket with your P2P investment. You could instead have bought Phoenix shares (PHNX) which still yield 6.5% (basic tax paid or tax-free in an ISA or SIPP) and benefited from capital appreciation too (average 20% in 6 months for me). You just need to watch out for these gems as they crop up; companies with good dividends, well covered with a positive outlook.

TheTracker

I control taxable income to keep a whisker under HRT so that's 7.4% net. No bad debt yet. I'll leave the suitably named Phoenix to you, good luck choosing next years performer.

Linton

EdGasket wrote: »

So after bad debt and tax you might end up with 5% or so depending on your tax bracket with your P2P investment. You could instead have bought Phoenix shares (PHNX) which still yield 6.5% (basic tax paid or tax-free in an ISA or SIPP) and benefited from capital appreciation too (average 20% in 6 months for me). You just need to watch out for these gems as they crop up; companies with good dividends, well covered with a positive outlook.

Yes but Phoenix certainly wont give you capital protection. For example you may have done well in 2nd half of the year but it fell by over 15% in the first half. Dividend paying shares are much riskier than P2P.

Dividend paying shares are a worthwhile way to invest in my view but you do need to hold say 15+ to provide good diversification. The banks were good dividend payers with capital appreciation until early 2007.

EdGasket

PHNX up over 1% today; I'd have to wait a year to earn that in my bank account!

Ryan_Futuristics

Question is always: will you know when to get out?

With a small portfolio of shares, I'd have some kind of trend following system using SMA crossover points or something just to take some of the guesswork out ...

Having said that, in my ongoing tirade against buy-and-hold monks, the "average" investor is a rather odd concept ... Find me what the average well researched investor using (let's say) a backtested trend-following system returns against the market, then tell me whether things are impossible