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simple passive investment - is this OK?
Comments
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mm, I am not sure what age that would be, being over 65 myself with less than 10% in cash. However if you can live comfortably on your income, have no desire or need to leave a small fortune to your relations, and have no interest in investing why invest?
One good reason to invest for someone in that position could be inflation. Cash ISAs will usually lose out to inflation. If you are in your 90's it perhaps isnt a major concern, but if you are in your 70s and in reasonable health it could be.
It could be worthwhile looking at an Absolute Return fund, and the SL one seems to be one of the better ones. I have some money invested with it. The problem is that Abs Ret funds are pretty new and havent been tested in difficult situations. The SL fund started in 2008 near the bottom of the crash and has had a relatively easy ride since.
Whether I would advocate your investing in it would depend on how much spare cash you have. If its £10K I wouldnt bother, with a pot of £100K perhaps £20K would be pretty safe to start off with.
2. Don't have the temperament to be an aggressive investor as I am more worried about losing what I have than making a lot more!
3. Am only looking at putting in £15,000 into a S&S ISA instead of a Cash ISA after April which would be less than 10% of my savings.0 -
moneyfoolish wrote: ».....
3. Am only looking at putting in £15,000 into a S&S ISA instead of a Cash ISA after April which would be less than 10% of my savings.
In which case investing in the SL Global Abs Ret fund seems a reasonable thing to do. It is currently nearly 50% invested in cash and similar. For the past 5 years it has averaged over 6% return annually, admittedly as I have said under pretty favourable conditions. Other than the cash it is widely invested globally.
Perhaps in a year or two you may be tempted to try something a little more err interesting. With less than 10% of your savings invested nothing you do is going to be life-changing for the better or worse.0 -
I'm not sure it's entirely accurate to say it's invested 50% in cash 'or similar'. In a £24 billion fund which aims to deliver a positive decent return, no fund is going to hold £12 billion of plain vanilla cash at current interest rates; investors could do that for themselves.
The stuff in that bucket which is not cash is a variety of derivatives which can deliver very different results from cash. It is just that the fund platforms don't know what bucket to put it in.
Here is a recent SL factsheet that shows the types of exposure it has: https://uk.standardlifeinvestments.com/O_M_Gars/getLatest.pdf
If you don't understand most of those market return, directional and relative value strategies Moneyfoolish, you would not be alone; it is something of a dark art, a black box that you put money in and hopefully get a solid return out of. SL use it as part of their own internal pension scheme, a good marketing story. It is a multistrategy product with fingers in a lot of pies although during its relatively short life the SL team has had some key management departures in different areas.
And it remains untested, as Linton says, in the worst of the economic downturns. When bonds and equities are both going up it is not hard to deliver an absolute return, though its lack of volatility has been very impressive compared to some other hedge / AR funds. So, you could hope that it wouldn't lose more than a few percent a year as you suggest, but it would be feasible that a perfect storm came along and knocked it for six.
I use it as part of my own non-equities holding within my work pension. I think the strategies it adopts are very interesting although the returns are, by design, not very interesting. I agree with Linton that if you have adequate income and provision for future income, and you are only considering putting 10% of your savings in something non-cash, then you probably won't do yourself too much damage by investing in this.
Of course, one school of thought on investing is not to invest in something you don't understand and so the expectation of no losses, without a guarantee of no losses, while following a set of 20+ strategies which nobody can claim to be an expert in all at once... is not for everyone.0 -
bowlhead99 wrote: »I'm not sure it's entirely accurate to say it's invested 50% in cash 'or similar'. In a £24 billion fund which aims to deliver a positive decent return, no fund is going to hold £12 billion of plain vanilla cash at current interest rates; investors could do that for themselves.
The stuff in that bucket which is not cash is a variety of derivatives which can deliver very different results from cash. It is just that the fund platforms don't know what bucket to put it in.
Here is a recent SL factsheet that shows the types of exposure it has: https://uk.standardlifeinvestments.com/O_M_Gars/getLatest.pdf
..........
As you say, a very interesting fund. As an amateur what it seems to me is that there is some straight equity and bond investing to provide an underlying long term return but also a lot of derivative betting of one asset against another, presumably to even out the volatility without being much affected by overall market moves. Why these derivatives would have that effect isnt immediately obvious to me but we will see. So far so good...
At least one thing seems likely - the fund shouldnt be strongly correlated with anything normal. Perhaps I should increase my holding.0 -
There is not an awful lot of net underlying exposure to the market, relatively low straight equity and bond investing - so it should not lose too much from that perspective.
A lot of the exposure is instead to plays on relative market value, which is good in the sense that overall market direction will not cripple you - and thus it's a good foil to the other things in your portfolio, not being too correlated to any of them. But this has its own downsides, in the sense that you're rather reliant on the manager picking the best (relative) side of the trade to be on to make sure your overall assets go up instead of down...
So, manager skill will play a part which is why I mentioned some management departures. One school of thought is that manager skill is always a net zero if there are two sides to a trade and you won't have the best guy on your team at all times. So, by not being actually invested long in the market or short in the market but just taking a punt on relative strength of one bit against the other - things can still go wrong and so while they have eked out small profits so far, it could be losses next time.
Of course they do have some raw market exposure so the fund won't be just sitting on the 'flat line less fees' that might be implied by the above.
As I say, I hold, and consider it to be a good non-equities holding, but for those people who have a long investment horizon and a scepticism of convoluted strategies, it may not be a great choice.0 -
The main purpose of absolute return or managed futures funds is diversification ... I don't think they've quite proven themselves good single holdings
33% each: equities, fixed income and managed futures is a very difficult asset allocation to beat in terms of risk/return - at least in the US market0
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