RIT & Capital Gearing as Defensives?

Linton

rathernot wrote: »

I think the difficulty with these things is you can only ever go off past performance to try to judge what might happen in the future surely?

If I look at RCP and CGT both have, since inception, averaged 11% annual returns.

That's through good years and bad and since 1973 for CGT and since 1988 for RCP.

Neither are options you'd use to double your money overnight or short term but if you're looking at a 20 year option both appear pretty "safe" options if you wanted to come out the other end with more than you went in with and more than you'd get in the bank.

If your objective was maximum return over the long term there would be no point in investing in WP funds. Their key feature is protection from major falls with a return better than cash or safe bonds. History shows that they can do it. Investing significantly in safe government bonds either directly or via VLSxx seems a strange choice when their price has no significant room to increase.

planteria

i'd go along with that.. i can see the logic of a 'Wealth Preservation' fund alongside direct equities/equity funds, but a bond fund isn't on my radar. and for what it's worth rn, late 30s with lots of cash alongside: i would just pick funds that you believe give you the best chance of great returns over the long term, and not worry too much about WP as you have that covered already.
i'm a bit older than you. i have a cautiously managed With Profits fund and fairly cautious Pension funds that sit alongside a riskier fund in my SIPP and my own stock picking in my ISA. i might add to the cautious elements: some relatively 'solid' investments have their place, but we might as well at least shoot for the stars .

rathernot

I'm confused if the last two posts are suggesting that there's no benefit with the likes of RCP and CGT over bonds?

I don't see any (sensible) bond funds returning an average 10/11% over the long term?

Audaxer

rathernot wrote: »

I'm confused if the last two posts are suggesting that there's no benefit with the likes of RCP and CGT over bonds?

I don't see any (sensible) bond funds returning an average 10/11% over the long term?

I read the posts as saying they are better to have as diversifiers at present in a balanced portfolio than bond funds. However as they are ITs you need to be a bit wary about buying them if/when they have a high premium. If they have averaged 10/11% over the long term, I would think they would be quite volatile. If they were guaranteed not to fall much in a crash and also to return 10/11% per annum, you would think everyone would want to hold these ITs. So I think they have to be more risky than a fund like Troy Trojan O which is less volatile with a more modest return, but seems to me more like what is meant by a Wealth Preservation fund.

rathernot

Audaxer wrote: »

I read the posts as saying they are better to have as diversifiers at present in a balanced portfolio than bond funds. However as they are ITs you need to be a bit wary about buying them if/when they have a high premium. If they have averaged 10/11% over the long term, I would think they would be quite volatile. If they were guaranteed not to fall much in a crash and also to return 10/11% per annum, you would think everyone would want to hold these ITs. So I think they have to be more risky than a fund like Troy Trojan O which is less volatile with a more modest return, but seems to me more like what is meant by a Wealth Preservation fund.

Well I'd like to read it that way as it confirms my way of thinking

From what I read CGT and Trojan O appear similar in intention.

RCP is riskier but I'm genuinely not sure how to quantify the risk v defence on it.

rathernot

So bit of a thread resurrection but I'm back to considering most of the funds referenced on this thread as the recent wobble made me realise that regardless of timescales, 100% equities is not a nice place to be with my delicate constitution

As it stands now I'm on pretty much 60% equities with an even split between Lindsell Train and Fundsmith.

That leaves 40% cash sitting in ISAs.

There is cash going in regularly from savings and salary income so when I say I'm on 60% equities and 40% cash I'm only referring to what's in the ISAs.

seacaitch

rathernot wrote: »

So bit of a thread resurrection but I'm back to considering most of the funds referenced on this thread

With any actively managed and high conviction fund held for the long term, you'll likely experience periods where you begin seriously questioning the judgement of the fund manager and wondering whether you'd be wise to continue holding. The funds you're considering are not ones that tactically chop and change their portfolios at every shift in the market wind and consequently they will from time to time encounter perhaps protracted periods where market conditions do not particularly suit them or their portfolio positioning and returns will disappoint.

Therefore, it's essential you do up-front research learning as much as you're able to about a manager's investment method and decide whether this is something you believe to be sound, suitable for you, and which you could stick with over the long term, enduring the inevitable periods of disappointment.

Perusing past performance charts of how something may have performed in the past is insufficient research because conditions in the future will not mirror those of the past. These funds are not black boxes, able to magically protect wealth, but are simply sums of their portfolio parts. That means a chart of how something behaved in 2008 has little-to-no bearing on how it might behave in the future during a different crisis when (a) its own portfolio differs now to then and (b) asset prices are very different and thus will behave very differently and (c) the nature of the crisis differs and will thus shape investors' behaviour differently.


NB as has been mentioned, RIT(RCP) doesn't really match the criteria for what I think you're looking for here, it being slanted more towards an optimistic/growthy stance than the others' more protective postures.

Also, note the trade-off (besides costs) that investors in actively managed funds are making compared to investors in index funds. Index investors may not like that an index fund is falling but simplistically at least they know there is no manager whose judgement may be at fault. This might allow them to more easily sit tight during market falls, treating the unpleasant market conditions as one might treat heavy rain when out - just one of those things you can't do anything about. In contrast, the investor in the actively managed fund may be expecting to see the manager prepared with an umbrella to hand, which is all well and good if it does appear and keeps you drier, but if it doesn't may cause an investor to be more disappointed (and risk selling low) than the index investor who simply accepts their temporary fate.

rathernot

Thank you, some good stuff there

As it stands I'm taking a dual approach. I have a couple of ISA's so in one I've gone passive for the part that isn't Fundsmith and Lindsell Train, and in the the other I've gone active with RCP being the "middle of the road" tier.

Time will tell, but I don't chop and change much in spite of asking a lot.

kidmugsy

Linton wrote: »

Suppose you had invested in a FTSE World Tracker, Ruffer, and a Global Bond fund at the start of 2007 around the high before the crash...

1) The tracker would have fallen significantly during the crash, the other two funds didnt fall at all.

At which point the standard mug punter panics, sells his tracker and forswears stock markets forever. He's therefore lost permanently compared to the Rufferites.

rathernot

kidmugsy wrote: »

At which point the standard mug punter panics, sells his tracker and forswears stock markets forever. He's therefore lost permanently compared to the Rufferites.

Quite and part of this exercise is to de-risk a little so hopefully in such a scenario I'm not that mug.