Gilts - my unanticipated nightmare

jamesd

valiant24 said:

jamesd said:

You seem to have the potential to crystallise and make the kids sure they can retire by 57 or maybe 55 using pension money if they want. They don't have a lifetime allowance constraint that causes them to want to invest quite a bit at low risk so the expected value is a good deal higher than if you waited until death.

Good point.
I sold the Gilt ETFs today, by the way, and took the hit.   I'm now sitting on a pile of cash pondering my next ill-judged move.

Sorry you ended up taking that hit, though. At least you've a broader idea of how the cash, money market and short term bond potential options work, as well as the briefest of introductions to capital preservation investment trusts. Perhaps combined with giving there should be enough there to get you a good chunk at low volatility, albeit with expected inflation losses.

aroominyork

jamesd said:

Thanks for the handy pictures and a reminder: they are more about illustrating volatility (commonly called risk) than they are about the long term trend of returns....

Volatility is indeed commonly called risk but it should not be. It is a proxy for risk - and maybe the best one we have - but they are very different things. Risk is about what happens in the future; volatility is about what has happened in the past. I do not like Trustnet's use of the word 'risk': "FE fundinfo Risk Scores define risk as a measure of volatility...". I think that's sloppy, but I guess one syllable is easier than five.

masonic

aroominyork said:

jamesd said:

Thanks for the handy pictures and a reminder: they are more about illustrating volatility (commonly called risk) than they are about the long term trend of returns....

Volatility is indeed commonly called risk but it should not be. It is a proxy for risk - and maybe the best one we have - but they are very different things. Risk is about what happens in the future; volatility is about what has happened in the past. I do not like Trustnet's use of the word 'risk': "FE fundinfo Risk Scores define risk as a measure of volatility...". I think that's sloppy, but I guess one syllable is easier than five.

An investment that smoothly declines over the course of a year to 100% loss would be considered low volatility, but not low risk. Equally, volatility can appear low due to illiquidity or infrequent valuation, but such things are an indicator of potentially higher risk than a more liquid equivalent. Some structured products have a smoother returns profile than cash... until things go wrong and the provider applies a MVR.

Thrugelmir

aroominyork said:

jamesd said:

Thanks for the handy pictures and a reminder: they are more about illustrating volatility (commonly called risk) than they are about the long term trend of returns....

Volatility is indeed commonly called risk but it should not be. It is a proxy for risk - and maybe the best one we have - but they are very different things. Risk is about what happens in the future; volatility is about what has happened in the past. I do not like Trustnet's use of the word 'risk': "FE fundinfo Risk Scores define risk as a measure of volatility...". I think that's sloppy, but I guess one syllable is easier than five.

Volatility is the easiest way for investors to understand and quantify risk. When assessing whether a particular investment is suitable for their personal objectives. Risk has many many forms.