Safe fund beating savings accounts?

sebtomato

SFindlay said:

sebtomato said:

Yes, I know no funds are as safe as savings accounts.
However, some funds are more risky than others, and some funds must have performed well during the recent crisis while still giving small returns (e.g. 2% pa).
I am ideally looking for something that doesn't swing too much, and has moderate returns above savings account.

You clearly don't understand, there is NO magical fund like you are seeking, don't you think everyone would be investing there if there was?!?!? 
Stick with the 1.2 or 1.3 % that you're getting and research investing until you understand the risks and accept there is no fund that will guarantee you a better rate than your savings accounts.  

I perfectly understand investing on the stock markets and bonds, thanks. I never said I was expecting a guarantee.
I am not sure you understand fully investing yourself: higher risk = higher interest/returns. Therefore, there must be some lower risks options with lower returns (but still a bit higher than 1.3%)... I just don't know what those are currently.

Prism

sebtomato said:

SFindlay said:

sebtomato said:

Yes, I know no funds are as safe as savings accounts.
However, some funds are more risky than others, and some funds must have performed well during the recent crisis while still giving small returns (e.g. 2% pa).
I am ideally looking for something that doesn't swing too much, and has moderate returns above savings account.

You clearly don't understand, there is NO magical fund like you are seeking, don't you think everyone would be investing there if there was?!?!? 
Stick with the 1.2 or 1.3 % that you're getting and research investing until you understand the risks and accept there is no fund that will guarantee you a better rate than your savings accounts.  

I perfectly understand investing on the stock markets and bonds, thanks. I never said I was expecting a guarantee.
I am not sure you understand fully investing yourself: higher risk = higher interest/returns. Therefore, there must be some lower risks options with lower returns (but still a bit higher than 1.3%)... I just don't know what those are currently.

Higher risk does not equal higher returns, although it might give the chance of a higher return but also the possibility of a terrible one. Usually a nice balance of risk gives the best return. Anyway, the problem here is that everybody has been flooding to various investments over the last 10 years. The class that previously would have given a low risk way of getting 2-3% returns (bonds) no longer exists and is likely just as high risk as equities. 

kuratowski

I think that's what Bowlhead's charts were showing, even a lower risk investment showed losses of 10%, albeit temporarily, in the recent market conditions.

Thrugelmir

Risk is the potential permanent loss of capital. Whereas volatility equates to how quickly/sharply an asset can move in price.  Often the two get muddled.
Exposing oneself to higher risk does not guarantee a greater return. Merely the potential of. Even then the increased return may only be marginal on annualised basis.
When investing you are always dealing with the unknown. Events that aren't even on the radar. Hence why returns offer a premium. That's the compensation for the increased risk. 
Anything that offers a secure or the potential of a good value return will always be gobbled up very quickly. That's a fact of life. 

Freecall

sebtomato said:

there must be some lower risks options with lower returns (but still a bit higher than 1.3%)... I just don't know what those are currently.

Unfortunately, for the retail investor, at the very bottom of that risk/return graph there are structural problems which manifest themselves as costs.

If you really are looking for an investment which is only likely to produce an incremental return of an extra percentage point or so with only a tiny risk to your capital then you will have difficulty.  A fund or IT manager could construct such a product but the costs involved would eat into any return and make the product unmarketable.

If I offered you a product which had a before inflation forecast upside of around 1.0% but with the possibility a 5.0% return along with a guaranteed downside being no worse than 0% (ie. you won't make a cash loss) would you be interested?

If so, that is readily available. 

If you want to take a look see here.

But ultimately may not be so attractive after all.

sebtomato

I think my requirements are:

• Funds that show a positive return over the last 3/6/12 months
• Preferably 2%+ over the last year (so beating any savings account)
• Funds that have low volatility (so not more than 1.5% variation per 30 days) so that I don't have to drip feed, and investment timing matters less

I wouldn't be forced to sell such investment at very short term (minimum 3-6 months notice), so would only be an issue if a fund was below purchase price for an extended period.
Looks like the "Vanguard Global Bond Index Hedged" fund can fit such criteria, has a low rated risk index and low fee.

Sailtheworld

sebtomato said:

Albermarle said:

RCI bank are offering 1.8% on a 5 year fixed rate , which is about as close as you will get to what you want.

Thanks, but I don't want my "savings" to be stuck for 5 years just to earn 1.8%. Doesn't seem to be a good return. 
If I wanted to lock the money down for 5 years, I think I would just drip feed into the stock market, and probably would have a high chance of earning the same amount (or more).

Unless you've got a mortgage or other debt to pay down then it's unlikely you'll do any better. 

Something else to think about is what you're actually saving for and whether there are any benefits to bringing that spending forwards. If, say, it's a new kitchen then buying it earlier would at least give you some utility value.

Drip feeding the stock market seems like a good idea if the money's spare and you don't need it. On the other hand if you don't need it and you've got plenty of money maybe you don't need to take any risk whatsoever and just take what's on offer?

Depends what risks you want to take but either way it's not the end of the world - plenty of people in the graveyard would be glad of this problem.

sebtomato

Sailtheworld said:

sebtomato said:

Albermarle said:

RCI bank are offering 1.8% on a 5 year fixed rate , which is about as close as you will get to what you want.

Thanks, but I don't want my "savings" to be stuck for 5 years just to earn 1.8%. Doesn't seem to be a good return. 
If I wanted to lock the money down for 5 years, I think I would just drip feed into the stock market, and probably would have a high chance of earning the same amount (or more).

Unless you've got a mortgage or other debt to pay down then it's unlikely you'll do any better. 

Something else to think about is what you're actually saving for and whether there are any benefits to bringing that spending forwards. If, say, it's a new kitchen then buying it earlier would at least give you some utility value.

Drip feeding the stock market seems like a good idea if the money's spare and you don't need it. On the other hand if you don't need it and you've got plenty of money maybe you don't need to take any risk whatsoever and just take what's on offer?

Depends what risks you want to take but either way it's not the end of the world - plenty of people in the graveyard would be glad of this problem.

I do have a fairly small mortgage, but at a rate of 1.64% for the next 5 years, so not worth paying back quicker.
I have no other debts. 
The issue with doing nothing with savings is inflation. It's zero risk, but likely to lose value (considering the interest rates lower than inflation), so doesn't seem to be a good idea (apart from some emergency short-term fund).

Thrugelmir

sebtomato said:

Looks like the "Vanguard Global Bond Index Hedged" fund can fit such criteria, has a low rated risk index and low fee.

Is that on the basis of historic data? 

Sailtheworld

sebtomato said:

I think my requirements are:

• Funds that show a positive return over the last 3/6/12 months
• Preferably 2%+ over the last year (so beating any savings account)
• Funds that have low volatility (so not more than 1.5% variation per 30 days) so that I don't have to drip feed, and investment timing matters less

I wouldn't be forced to sell such investment at very short term (minimum 3-6 months notice), so would only be an issue if a fund was below purchase price for an extended period.
Looks like the "Vanguard Global Bond Index Hedged" fund can fit such criteria, has a low rated risk index and low fee.

I'm not sure it fits your criteria. It's up quite a lot since October - if it can go up it can go down. 1.5% variation every 30 days is a lot over the course of a year especially something which is meant to be a proxy for a savings account.