Baldrick's cunning plan

Bobziz

So having spent far too much time on this forum, Monevator and elsewhere, this is my cunning plan to grow a small amount of money, which I can afford to lose, into a university fund for my eldest. I appreciate that the consensus is that it's time in the market rather than timing the market, but I can't resist having a little stab. I acknowledge that my chances of success are limited, so my backstop is all in by next Feb. If I achieve what I think is a modest target, then great, but this will be as much about learning for me than anything else. Any thoughts would be much appreciated. I'm guessing many will laugh at my attempts to time the market, as I will no doubt do myself with the benefit of hindsight, but does the broader plan seem sensible ?

Invest £10k for a period of 8 years, in 3 tranches to achieve 50% growth. 1st tranche in 23rd Aug to capture s&p breakout following senate agreement on latest COVID relief funding, 2nd tranche 26th Oct to capture Nov US election outcome, 3rd by end of Feb to capture price with further virus unknowns reduced following flu season. If s&p drops by 10% from Aug high then the 2nd tranche will be added immediately. The 3rd tranche will go in if a further 10% drop occurs or by the end of Feb at the latest.

3 funds will be held in an adventurous portfolio. HSBC FTSE All-world index at an 80% weighting, Allianz strategic bond fund at 10% weighting to add diversity of asset types and possibly reduce volatility a little (although I appreciate that this fund is not low risk by any stretch), and 10% Baillie Giffford positive change fund to ease my conscience. The portfolio will be rebalanced to these weightings once a year. Derisking at year 5 if within 10% of target. i.e. convert entire portfolio to VLS 40 at years 5 & 6 and then VLS 20 at year 7. 

bowlhead99

My general comment would be that it is quite ambitious to make 50% gain over 8 years with a 74% equities portfolio. It requires 5% growth annualised- or a little more, given that you will not be fully invested for the 8 years because you've said some of the money won't even be invested until next February.

A long term return on a three quarters equity portfolio of 5% annualised or, say, inflation-plus 3% does not sound massively ambitious. However, a period of 7.5 to 8 years is short to medium term rather than 'long term', so it's far from a certainty that the portfolio would deliver your target of 5% annualised. Maybe it would, maybe it wouldn't, but when starting from relatively high index values for both equities and bonds it's probably best that you err on the side of caution when setting your expectations.

Maybe we will get much higher inflation than we've had in recent years so that getting 5% return on your money is only inflation plus a percent or so, and not difficult to achieve, but it's difficult to speculate the shape of markets in five years time. All you can say is that you might make your desired 50% in eight years or you might not. If you have achieved 30% return over the next five years from now, you would not be at your arbitrary 10% from target so would not de-risk. But you would be sitting there with only three years until you need the money, and you might lose a quarter or third of it and end up back where you started. Stranger things have happened.

The BG positive change fund is not a bad growth-focused fund at all, but has the potential to be volatile. Not a major issue when only 10% of the portfolio, but worth being aware of if you weren't. Obviously recent results look great, but recent years have been kind to the particular companies it chose to hold.  A token 10% invested in a high conviction 'positive change factor' fund should not really give you a warm and fuzzy feeling that your conscience has nothing to worry about, because it sounds like 90% of your assets are being invested with no regard whatsoever for ethical considerations.

Zanderman

I thought Baldrick's cunning investment plan was to invest £400k on a giant turnip? 
An excellent investment - edible if need be and biodegradable too - the perfect ethical investment.
https://www.youtube.com/watch?v=jD2iYSKHHzo

bigadaj

Zanderman said:

I thought Baldrick's cunning investment plan was to invest £400k on a giant turnip? 
An excellent investment - edible if need be and biodegradable too - the perfect ethical investment.
https://www.youtube.com/watch?v=jD2iYSKHHzo

There are several on this forum that would insist that the money be best invested in purest green.

Username999

Total S&P 500 Return (Dividends Reinvested) - Inflation Adjusted (CPI)
Jan to Jan

From	To	Return
2000	2008	-12.00%
2001	2009	-38.00%
2002	2010	-6.00%
2003	2011	38.00%
2004	2012	10.00%
2005	2013	22.00%
2006	2014	42.00%
2007	2015	46.00%
2008	2016	47.00%
2009	2017	170.00%
2010	2018	154.00%
2011	2019	108.00%
2012	2020	159.00%

Albermarle

 into a university fund for my eldest

Presume you are aware that the sensible financial thing to do is to get the maximum student loan for tuition and living costs .

Paying for it yourself is not sensible as the likelihood is that most of the loan will never have to be paid back.

Some family subsidy is normal though for part of the living /accommodation costs. The amount varies on what you can afford etc but typically can be £2K to £5K pa 

AnotherJoe

I don't think you are being bold enough. Pick some funds or ITs or ETFs or shares with reasonable prospects of high growth. Not a bond fund. Or an all world index. 

So maybe the BG fund. But not the others. 

I could suggest other ideas  but I guess that's up to you to do some research but going back to your original premise, it's too cautious IMO 

Bobziz

Useful comments as ever folks, many thanks. Consider my expectations managed. 

Bowlhead99 - I would look to withdraw in £5k tranches as needed in years 9, 10 and 11, so 8 (7.5) years would be the minimum period invested, but yes still medium term with associated risks. Plan b would involved keeping the whole lot invested and funding university with cash reserves which are then replaced as and when portfolio performance permits.

I don't wish to start another ESG thread, but yes, once you decide that you're going to do something positive, then you lay yourself open to claims of hypocrisy. I don't believe there's any position that can be taken where that is not the case. For my part, the last 20 years of my career have been focused on trying to make a positive change, so I sleep reasonably easily already. That said, you're challenge has pushed me to look a bit further on how I might replicate the all world index fund in a ESG style, so thank you.

Username999 - Thanks, useful to see the 8 year returns over the last 13 years. IF history repeats itself then my chances of success look reasonable, although there's also a chance that I'll be eating raw turnips for breakfast lunch and dinner!

Albermarle - Thanks, yes that was my thinking, hence the £15k target.

Bobziz

AnotherJoe said:

I don't think you are being bold enough. Pick some funds or ITs or ETFs or shares with reasonable prospects of high growth. Not a bond fund. Or an all world index. 

So maybe the BG fund. But not the others. 

I could suggest other ideas  but I guess that's up to you to do some research but going back to your original premise, it's too cautious IMO 

Thanks, you may well be right, but at this time I don't have the confidence to pick what may turn out to be top performing funds. I like the idea of having the bulk of my portfolio as a passive investment, rather than trying to pick talented fund mangers that might outperform the market. 

noClue

Bobziz said:

AnotherJoe said:

I don't think you are being bold enough. Pick some funds or ITs or ETFs or shares with reasonable prospects of high growth. Not a bond fund. Or an all world index. 

So maybe the BG fund. But not the others. 

I could suggest other ideas  but I guess that's up to you to do some research but going back to your original premise, it's too cautious IMO 

Thanks, you may well be right, but at this time I don't have the confidence to pick what may turn out to be top performing funds. I like the idea of having the bulk of my portfolio as a passive investment, rather than trying to pick talented fund mangers that might outperform the market. 

An all world index is passive?

Murphy_The_Cat

Zanderman said:

I thought Baldrick's cunning investment plan was to invest £400k on a giant turnip? 

Thats where you're going wrong.  You need to invest £400k in a turnip shaped like a thingy.

OMG Blackadder II, episode 5 Beer ---- 1986.  34 years ago and I can still recall some of lines word for word.