3 questions

gudda96

I was considering moving from HL to AJB and from what you say, I will do that. I will sell LT and top up same at AJB, am a bit confused over class ?

If vls are similar, I accept there is no need for both, especially as I am all for simplicity, possibly makes sense to sell vls so all will be with AJB.

would i be expecting too much to hope for 5% growth on my portfolio?

Thrugelmir

gudda96 wrote: »

would i be expecting too much to hope for 5% growth on my portfolio?

Above inflation?

gudda96

Thrugelmir wrote: »

Above inflation?

Ideally, but will accept what I get

bowlhead99

gudda96 wrote: »

Thrugelmir wrote: »

gudda96 wrote: »

would i be expecting too much to hope for 5% growth on my portfolio?

Above inflation?

Ideally, but will accept what I get

I would say yes, inflation plus 5% is too much to hope for over the long term on a portfolio that is lower risk than 100% equities.

In the current market conditions I would probably expect even less than 'inflation plus 5' on global equities, you may get some quite 'lean' years before we get back up to the longer term averages.

If the portfolio is only part equities, because one of your objectives is to preserve capital and not see huge dips in value, you should probably expect to get less than 'inflation plus 5' in the longer term, and certainly in the short term (equity markets are at relatively high points, US 10-year govt bonds at 1.75%, UK at 0.65%, Germany negative 0.5, GBP relatively weak, etc).

However, if you will genuinely accept what you can get, then I expect you'll find the returns wholly acceptable!

gudda96

It certainly is a complicated business this investment game, I have read many posts on this forum and Citywire forum. As expected, there are lots of contradictions which i suppose is healthy, but, like reviews on a product, do you take notice of the good reviews or bad ones before buying.

I have listened, and in fact, taken advice on members to change my portfolio at the moment, to preserve capital. My plan will be, to let it settle down, knowing it is as safe as one can arrange it, whether it will satisfy me by giving me no, or hardly any income, remains to be seen. (sold my LTGE with HL yesterday, will buy same from AJB)

I must not forget, my first aim was/is, to earn some income to "pay for coffees" etc, and IF POSSIBLE, retain the capital.

I still have never had a clear cut answer on the scenario " if we can speculate, that a company like RDS CANNOT, or is very UNLIKELY to ever go bust" what/where is the risk of investing solely with them. I know the price would go up/down over the years, but in the meantime, earn 6.9%,

Ok, if a war starts and oil is affected badly and price looks like dipping, sell the share ?? I await very loud answers

bowlhead99

gudda96 wrote: »

I must not forget, my first aim was/is, to earn some income to "pay for coffees" etc, and IF POSSIBLE, retain the capital.

There is a different mindset and approach between 'earn income or growth and if possible preserve the capital' and 'preserve the capital and if possible grow it or provide income'.

If you will still buy coffees whether or not it would use up your capital, and are not going to limit your coffee buying to the amount of income or growth achieved in a particular year (e.g. throttle back the spending if the markets have a few bad years), it probably doesn't make sense to go for all out growth with 100% equities (because you will really erode your capital if you keep spending it while markets are really low) and it doesn't make sense to go super-conservative with loads of cash and bonds (because you won't make the inflation-beating growth you need to afford the withdrawals).

So it makes sense to use a broadly diversified portfolio which allows a bit of growth, a bit of income, and avoids excessive downside risk in a downturn of either the equity or bond markets, because you hold a bit of everything.

That seems to be what you had roughly constructed with two balanced mixed asset funds (with different approaches), plus a managed fund dedicated to global equities (LT), and a managed fund set up for capital preservation (CG). Other people would look to simplify it with fewer funds, others would look to complicate it more.

There is no right answer, but if the general goal is to spread risk without too much complexity and no major overarching objective or target (in terms of volatility or performance - because you'll just take whatever you get and hope that long term it will be fine) then you are probably not going to do too badly. What you have ended up with is quite a lot more conservative than what you started with. Whether it's too conservative, or not conservative enough, for what you really wanted...time will tell.

I still have never had a clear cut answer on the scenario " if we can speculate, that a company like RDS CANNOT, or is very UNLIKELY to ever go bust" what/where is the risk of investing solely with them. I know the price would go up/down over the years, but in the meantime, earn 6.9%,

There are lots of individual companies that people assumed would not go bust, and then did. If you put your money into things like HMV, Blockbuster and Woolworths, they were all big brands that didn't anticipate competitors on the high street, and are now sadly defunct. You could say that investors in retail businesses should have seen it coming, just like Marks & Spencer falling from grace and out of the FTSE100. But many bigger firms have failed - in the 90s or early 2000s, people were happy to pile money into GEC or RBS for a decent dividend which collapsed along with the valuation of the company. WorldCom was a $186 billion company which went to $nil. Likewise Enron's $70bn.

If people are willing to value Shell at 'only' a couple of hundred billion pounds, so that its $1.88 per share dividend or whatever is a nice 6-7% annual dividend, that implies they don't expect stellar growth, and just hope the company stays stable and keeps pumping, and that there are not too many negative shocks in energy pricing. The world order changes from time to time and so do companies' ability to pay dividends. For example in 2010, BP's share price went from 640 to 320 within a month or two, due to some calamity that was specific to BP and not the entire global stockmarket.

Also with a global company like Shell, currency is a risk because your $1.88 a year dividend is over £1.55 at recent exchange rates, but would be a third lower if there were $1.8 dollars to the pound.

So if you pay £24 to get £1.50 a year but then the dividend drops to £1, then the dividend drops temporarily to nil while the share price drops to £12 due to a company-specific issue, and drops again to £8 due to broader market issues... it won't be much comfort to think that it is "unlikely" to go bust. Because you would be sitting on a 75% loss, which your game plan of '6.9% reliable dividend' had not really anticipated.

Ok, if a war starts and oil is affected badly and price looks like dipping, sell the share ?? I await very loud answers

Wars can be quite good for the price of oil because it can restrict supply and people will pay more for the barrels that they can get their hands on. Although might be bad if it's your company's facility being blown up. Loud answers might be needed if you are trying to hear them over the explosions.

Thrugelmir

gudda96 wrote: »

I still have never had a clear cut answer on the scenario " if we can speculate, that a company like RDS CANNOT, or is very UNLIKELY to ever go bust" what/where is the risk of investing solely with them. I know the price would go up/down over the years, but in the meantime, earn 6.9%,

High yields are for a reason. RDS has maintained the same dividend for 6 years. Only reason for the increase is fall in the £ as dividend is declared in €. Commonly referred to as a value trap.