Alternative To Holding Cash in SIPP?

bowlhead99

Aminatidi said

Personally I'm cautious about Ruffer as I've held it twice and sold it twice and I can never quite shake the feeling they're trying to be a little too clever about things with the level of (costly) protections and options they use.

It can certainly be easy to say with hindsight that a particular strategy was 'too clever for its own good', based on what others achieved with more simplistic strategies in the particular market conditions that ended up transpiring.

Having sat with Ruffer investment directors in the past (professionally at boardroom tables or lunches, I'm not buddies with them), they've generally come across as highly knowledgeable in their areas of expertise and generally insightful, so I don't doubt their competence. Still, I don't have any of their investment products as I don't have 'private client' levels of money to invest and have DIY'd my portfolios using other rival products (e.g. PNL) so no need to add RICA or their OEICs on top.

bowlhead99

Aminatidi said:

DiggerUK said:

You would be well served with Gold backed ETF's/ETC's, especially on the timescale you mention..._

Gold fascinates me.

I'm wondering if I'd have held my nerve if I was in it heavily enough and "preservation of wealth" was my intention?
[Chart]

Generally the people who like it a lot would have been buying it not just on day one of the chart for 100 or late the following year at 150, but at the various points in between, and also on the journey back down to 90 in 2015, and so on. Then when it recently surged from 120% to 180% of summer 2010's value in a little over a year, they would feel very happy and vindicated for sticking with it through the huge losses off the previous peak.

Stable, it is not. And the 'keep buying to get an average long term price' is a concept that could be applied to any other long term better-performing asset such as equities, and not very easy if you are talking about a retirement portfolio like OP's which won't be having new money coming in to buy the ups and downs if you don't have other things that you are looking to exit.

So really the addition of gold would be something just to consider as a 'diversifier' - it could be of use due to the fact that its value isn't very correlated with equities and bonds, so it can help reduce overall volatility of a portfolio if you add it to the equities and bonds you hold.

If, as in OP's case, you were looking for inflation proofing and low risk over the timescale you were drawing from the portfolio, it would be a bad thing to hold on its own to do those jobs, as evidenced by the chart from summer 2011 to the first half of 2019 when it had lost a good proportion of its value in both nominal and real terms.

Whereas by adding some of it to a diverse multi asset portfolio and periodically rebalancing, it could reduce the volatility without necessarily hurting the ability to preserve real terms value over the very long term (ie not as bad at holding large unused cash reserves for that purpose).

Aminatidi

bowlhead99 said:

Aminatidi said

Personally I'm cautious about Ruffer as I've held it twice and sold it twice and I can never quite shake the feeling they're trying to be a little too clever about things with the level of (costly) protections and options they use.

It can certainly be easy to say with hindsight that a particular strategy was 'too clever for its own good', based on what others achieved with more simplistic strategies in the particular market conditions that ended up transpiring.

Having sat with Ruffer investment directors in the past (professionally at boardroom tables or lunches, I'm not buddies with them), they've generally come across as highly knowledgeable in their areas of expertise and generally insightful, so I don't doubt their competence. Still, I don't have any of their investment products as I don't have 'private client' levels of money to invest and have DIY'd my portfolios using other rival products (e.g. PNL) so no need to add RICA or their OEICs on top.

Yes and to be fair whenever I see Duncan MacInnes or anyone from Ruffer interviewed I share that sentiment.

I certainly don't have private client levels of money either (I bloody wish!!) I just held some shares in RICA and as a reasonably new investor I'll hold my hands up that I was probably too reactionary to a very bad year or two by their own admission.

It's really difficult to articulate because as you say they're clearly knowledgeable there's just something that feels a bit too "smart" compared to the other two.

Oddly enough as the investment pot hopefully continues to grow I do find myself still looking at RICA as a possible option if I ever feel uncomfortable with so eggs between two baskets and want a third.

Aminatidi

bowlhead99 said:

Generally the people who like it a lot would have been buying it not just on day one of the chart for 100 or late the following year at 150, but at the various points in between, and also on the journey back down to 90 in 2015, and so on. Then when it recently surged from 120% to 180% of summer 2010's value in a little over a year, they would feel very happy and vindicated for sticking with it through the huge losses off the previous peak.

That's the bit that leaps to mind wherever gold is concerned.

I know personally I'd struggle seeing anything losing large amounts of value so whilst it fascinates me so far I've left it to be covered as part of a multi-asset trust where its performance (a bit like any other asset in a multi-asset) is a little bit hidden from view and hopefully the whole trust tracks in the right direction.

bowlhead99

Aminatidi said:

I know personally I'd struggle seeing anything losing large amounts of value so whilst it fascinates me so far I've left it to be covered as part of a multi-asset trust where its performance (a bit like any other asset in a multi-asset) is a little bit hidden from view and hopefully the whole trust tracks in the right direction.

A general approach to growing your wealth is to assemble a portfolio of things which individually have the potential to preserve or grow the value of the portfolio in real terms, but which do not always rise and fall in synchronised correlation with each other at the same times, and periodically rebalance between them.

For an active strategy this can include things that do not actually grow in real terms, such as cash, because as (e.g.) PNL have noted in their previous reports, cash has utility in terms of giving optionality to favourable market conditions that come up - i.e. by holding it you will have the ability to react to, and participate in, an opportunity that comes along.

When you have built your diverse portfolio you just need to hold it and look after it. Looking after it generally doesn't mean dumping something that has lost value, because that's the opposite of 'looking after it' - like kicking a child out of class for doing badly, you are waving byebye to the potential of them helping you in future.  So, if it has done relatively less well than other things, you can top it up instead.

Note, it can be different with individual stocks - when an equity falls heavily in value you may be observing its price dropping because it will ultimately fail and have no value when the company goes bust or gets liquidated or taken over by its creditors, which is why people say cut your losses. Whereas when you're looking from a high level top down portfolio approach at different asset classes, it is unlikely that 'UK equities' or 'US government bonds' as an entire asset class are going to go bust; you may adjust portfolio weightings to account for your view on their prospects, but there is no need to have knee jerk reactions that things should automatically be dropped if their value falls. 

Once you have a diverse portfolio and a mindset in which you know you won't be selling 'losers' and cementing real losses by selling things that have relatively poor market valuations for the prospects they offer, it is much easier to see things lose large amounts of value without being unduly unnerved, especially where they are not massive proportions of your portfolio. 

As you suggest, if you dislike seeing things change in value too much you can participate in them through a mixed asset product where someone else has the responsibility for monitoring it and doing something with it; the diversification within the overall product will generally deliver lower overall volatility than its most volatile individual constituents, and if they are somewhat competent the trust will generally track in the right direction to the extent that market conditions allow. The right direction, within reason, may be negative from time to time (because if we didn't accept any negatives at all we would likely miss out on a lot of positives) but a mixed asset fund dropping 10% when equities drop 40% can still be regarded as 'on the right track', because it is a better result than losing 40%, and it doesn't mean you'll fail to meet your objectives in the end.

Audaxer

TCA said:

It wouldn't all be taken out at once but the question is based on the premise that there is no requirement to take increased risk when further gains are not required.

If you have more than enough in investments to comfortably fund your retirement and you do not want to take on any more risk, I think it is just as well to keep your cash holding and and accept the inflation risk. In such a comfortable position you might have plans for some big spend items from the cash holding. If not I would just drawdown the cash as required until you are down to what you deem a reasonable cash buffer, so that when you do need to start drawing from your investments, you still have enough of a cash buffer to drawdown from during market crashes.

Time4T_Accounts

I have by no means the level of knowledge or experience of many on here, but a question that the OP might want to consider - particularly in the light of the circumstances in which he/she appears to be - is how much of their valuable time they want to invest in actively managing a portfolio? If they enjoy doing it, then go for it. Otherwise let it take care of itself, and get on with enjoying retirement!

The thought’s just struck me : going back to my university days, it’s a bit like a linear programming problem ... what’s your ‘limiting factor’...?!!

83705628

DiggerUK said:

You would be well served with Gold backed ETF's/ETC's, especially on the timescale you mention..._

/
Gold is not an investment. It's a currency.

83705628

bowlhead99 said:

Aminatidi said:

DiggerUK said:

You would be well served with Gold backed ETF's/ETC's, especially on the timescale you mention..._

Gold fascinates me.

I'm wondering if I'd have held my nerve if I was in it heavily enough and "preservation of wealth" was my intention?
[Chart]

Generally the people who like it a lot would have been buying it not just on day one of the chart for 100 or late the following year at 150, but at the various points in between, and also on the journey back down to 90 in 2015, and so on. Then when it recently surged from 120% to 180% of summer 2010's value in a little over a year, they would feel very happy and vindicated for sticking with it through the huge losses off the previous peak.

Stable, it is not. And the 'keep buying to get an average long term price' is a concept that could be applied to any other long term better-performing asset such as equities, and not very easy if you are talking about a retirement portfolio like OP's which won't be having new money coming in to buy the ups and downs if you don't have other things that you are looking to exit.

So really the addition of gold would be something just to consider as a 'diversifier' - it could be of use due to the fact that its value isn't very correlated with equities and bonds, so it can help reduce overall volatility of a portfolio if you add it to the equities and bonds you hold.

If, as in OP's case, you were looking for inflation proofing and low risk over the timescale you were drawing from the portfolio, it would be a bad thing to hold on its own to do those jobs, as evidenced by the chart from summer 2011 to the first half of 2019 when it had lost a good proportion of its value in both nominal and real terms.

Whereas by adding some of it to a diverse multi asset portfolio and periodically rebalancing, it could reduce the volatility without necessarily hurting the ability to preserve real terms value over the very long term (ie not as bad at holding large unused cash reserves for that purpose).

/
Gold has no utility as an investment. It doesn't do any of the things people think it does.

csgohan4

I would treat gold like any investment, don't hedge heavily into it, instead consider it as a diverse part of your portfolio but as it is not a fund per say, it could lead to more volatility with nothing else to prop it up.

Why not consider ETC's which include gold as well as other commodities so if the price of gold drops, other things can reduce the down turn, much like a fund in some ways