Timing the market

Diplodicus

More than that, investors have an inherent reliance on their home economy. We already have a huge bet on £ before we allocate our investments. I don't mean just house prices but the state of the road that runs by and the standard of the school at the end of it. Something to think about for those worrying whether 6 or 20% is an appropriate allocation. 

Since American shares have appreciated much faster than UK ones - and I don't rebalance - my portfolio is now c 70% USA equities. Since other assets are in sterling, it sits comfortably. Also, in the event of a crisis, the USA would be less vulnerable than "Global Britain." Money always flies to the $ in those circumstances.

Thrugelmir

Diplodicus said:

Since American shares have appreciated much faster than UK ones - and I don't rebalance - my portfolio is now c 70% USA equities.

Keep buying them and the price will appreciate even more. Retail money flow in aggregrate is as important as institutional. 

Malthusian

waveydavey48 said:

Is it impossible to time the market? Wiser heads than mine say yes but I said on the forum when the Covid crisis struck and markets were way down that as soon as the new tax year started I would whack my ISA allowance into VLS60. I did so, buying at £180.94. The price has risen steadily and today is £236.66. Doubtless it could crash tomorrow of course.

You picked an arbitrary date you were going to enter the market and stuck to it. (Even though everyone in April 2020 agreed you were insane because the pandemic would turn the world economy upside-down and it would take years to recover.) That's very different from sitting on cash trying to predict when the market has hit the bottom.
If the tax year end had been in October your market timing bet would have failed.

How long had that money sat in cash waiting for April 6 2020? Any longer than about three years and you almost certainly lost money on your market timing. (You could still have lost money if the cash had been available for investment in 2018 and 2019 if it coincided with the dips in those years.)

[Deleted User]

MarkCarnage said:

Deleted_User said:

MarkCarnage said:

Calling the fund “wealth preservation” and aiming for “no loss” is smart.  Bernie Madoff used the same tactics.  Not to say its a Ponzi scheme. They are certainly taking major bets though. UK is the largest allocation.  Japan second.  Very small  US holding.  Seem to be very secretive; investing in own funds so can’t tell what is their actual asset allocation.  I wouldn’t touch a closed fund like this but thats just my opinion. 

On the assumption that it's Ruffer you are talking about, I don't think that they, or the other WP funds, expect 'no loss' over all and any time periods. If you want that, buy Premium Bonds. What they do show is smaller and shorter drawdowns, less volatility and a desire to preserve capital. 

Comparing Ruffer or other mainstream WP funds with Madoff is egregious and misleading. Closed end funds can't pay new investors with other people's money for a start. 

I don't think that having the UK as the largest allocation is a 'major bet' for this type of fund. It reduces currency risk. Much of it is in IL Gilts or Treasury Bills. Japan is 7% of the fund. 

The investment in own funds is fact, though not sure that makes it secretive per se. The asset allocation does include option strategies which are designed to mitigate credit risk, interest rate/duration risk. 

It did briefly include Bitcoin, which I fundamentally and strongly disagreed with. Glad they sold it. 

I hold several WP funds. They are all there for a purpose in a larger, more equity based portfolio. I'm not under any illusions that they will outperform equity funds long term, or for that matter have 'no loss' in a time of general market stress. However, longer term they have tended to do what they say on the tin. 

Every fund manager and every investor has a desire to preserve capital. At least I never heard one claim they want yo lose capital.  Thats not a distinguishing feature. They use a marketing technique which is reminiscent of Medoff’s, playing on human psyche, but like I say, its not a Ponzi.  

On a side note, they have so much in government bonds that the chance of losing capital (in real terms over lng term) has to be high. 

They have UK as the number 1 allocation for equities.  Thats a huge bet.  What does UK make? 6% of the market?  Limits the types of companies too. Investing in UK stocks does not reduce currency risk.  If pound goes up, costs increase while exports drop, so company becomes less valuable in real terms. Its a risk. 

 

Most indeed I would suggest all, equity managers prioritise long term growth over short/medium term capital preservation. Of course none say they want to lose capital, but they accept, implicitly if not explicitly, that volatility is a risk.....which is somewhat different from 'losing capital'. Losing capital for me is crystallised losses, whether by holdings going bust or bad timing of withdrawal by investors. Therefore I think it is at least in part a distinguishing feature.

All the WP funds hold Government bonds to a significant degree. Currently, they are overwhelmingly in IL Bonds (inflation hedge) or T Bills (cash essentially). Some holds TIPS in preference to UK Linkers, some have derivative overlays to hedge duration/rate risk etc. Yes, there is a chance of losing capital in real terms, whether that chance is 'high' is subjective I suggest, and depends on manager skill in asset allocation changes, hedging these risks effectively etc.

Ruffer currently have UK listed equities as the major allocation within equities, it's 20% of the total fund or so. However, their largest holdings are by no means all plays on the UK economy, though might be challenged on ESG grounds in a couple of cases. You fail your own argument by saying that there is a currency risk, which there is, because most of these holdings generate significant revenue and profits outside the UK. Other  WP funds, e.g. PAT have a more global listed equity portfolio. 

You clearly don't like them, but to compare them to Madoff is I think just wrong. 

RICO has 35% of the equity allocation in the UK vs 6% market cap.  Thats a bet.

Looking under the hood, they are investing in companies with low P/E ratios which partly explains UK tilt.  They are also ignoring Technology, for the same reason.  Thats another bet.  

There are lots of funds designed to lower volatility.  Some are called “low volatility”. Others hold a lot of bonds (eg VLS40).  Yet others invest in value companies.  Value, low vol, mixed asset - all of these are standard transparent non-emotional terms designed to explain investment style. 

“Wealth preservation” funds may be doing the same thing but they don’t make investment style transparent.  Instead they appeal to our inner fears of losing money and use a meaningless advertising term.  And what about people who are not wealthy?  Would they reject their investments?  Do they only take cash from billionaires? Nonsense.  Again, appealing to our vanity as part of a marketing ploy.  

MarkCarnage

Deleted_User said:

MarkCarnage said:

Deleted_User said:

MarkCarnage said:

Calling the fund “wealth preservation” and aiming for “no loss” is smart.  Bernie Madoff used the same tactics.  Not to say its a Ponzi scheme. They are certainly taking major bets though. UK is the largest allocation.  Japan second.  Very small  US holding.  Seem to be very secretive; investing in own funds so can’t tell what is their actual asset allocation.  I wouldn’t touch a closed fund like this but thats just my opinion. 

On the assumption that it's Ruffer you are talking about, I don't think that they, or the other WP funds, expect 'no loss' over all and any time periods. If you want that, buy Premium Bonds. What they do show is smaller and shorter drawdowns, less volatility and a desire to preserve capital. 

Comparing Ruffer or other mainstream WP funds with Madoff is egregious and misleading. Closed end funds can't pay new investors with other people's money for a start. 

I don't think that having the UK as the largest allocation is a 'major bet' for this type of fund. It reduces currency risk. Much of it is in IL Gilts or Treasury Bills. Japan is 7% of the fund. 

The investment in own funds is fact, though not sure that makes it secretive per se. The asset allocation does include option strategies which are designed to mitigate credit risk, interest rate/duration risk. 

It did briefly include Bitcoin, which I fundamentally and strongly disagreed with. Glad they sold it. 

I hold several WP funds. They are all there for a purpose in a larger, more equity based portfolio. I'm not under any illusions that they will outperform equity funds long term, or for that matter have 'no loss' in a time of general market stress. However, longer term they have tended to do what they say on the tin. 

Every fund manager and every investor has a desire to preserve capital. At least I never heard one claim they want yo lose capital.  Thats not a distinguishing feature. They use a marketing technique which is reminiscent of Medoff’s, playing on human psyche, but like I say, its not a Ponzi.  

On a side note, they have so much in government bonds that the chance of losing capital (in real terms over lng term) has to be high. 

They have UK as the number 1 allocation for equities.  Thats a huge bet.  What does UK make? 6% of the market?  Limits the types of companies too. Investing in UK stocks does not reduce currency risk.  If pound goes up, costs increase while exports drop, so company becomes less valuable in real terms. Its a risk. 

 

Most indeed I would suggest all, equity managers prioritise long term growth over short/medium term capital preservation. Of course none say they want to lose capital, but they accept, implicitly if not explicitly, that volatility is a risk.....which is somewhat different from 'losing capital'. Losing capital for me is crystallised losses, whether by holdings going bust or bad timing of withdrawal by investors. Therefore I think it is at least in part a distinguishing feature.

All the WP funds hold Government bonds to a significant degree. Currently, they are overwhelmingly in IL Bonds (inflation hedge) or T Bills (cash essentially). Some holds TIPS in preference to UK Linkers, some have derivative overlays to hedge duration/rate risk etc. Yes, there is a chance of losing capital in real terms, whether that chance is 'high' is subjective I suggest, and depends on manager skill in asset allocation changes, hedging these risks effectively etc.

Ruffer currently have UK listed equities as the major allocation within equities, it's 20% of the total fund or so. However, their largest holdings are by no means all plays on the UK economy, though might be challenged on ESG grounds in a couple of cases. You fail your own argument by saying that there is a currency risk, which there is, because most of these holdings generate significant revenue and profits outside the UK. Other  WP funds, e.g. PAT have a more global listed equity portfolio. 

You clearly don't like them, but to compare them to Madoff is I think just wrong. 

RICO has 35% of the equity allocation in the UK vs 6% market cap.  Thats a bet.

Looking under the hood, they are investing in companies with low P/E ratios which partly explains UK tilt.  They are also ignoring Technology, for the same reason.  Thats another bet.  

There are lots of funds designed to lower volatility.  Some are called “low volatility”. Others hold a lot of bonds (eg VLS40).  Yet others invest in value companies.  Value, low vol, mixed asset - all of these are standard transparent non-emotional terms designed to explain investment style. 

“Wealth preservation” funds may be doing the same thing but they don’t make investment style transparent.  Instead they appeal to our inner fears of losing money and use a meaningless advertising term.  And what about people who are not wealthy?  Would they reject their investments?  Do they only take cash from billionaires? Nonsense.  Again, appealing to our vanity as part of a marketing ploy.  

I think the term was coined by others. However, I think it's still a valid and fairly accurate description of what they try to do. Of course there are 'bets' as you call them, but they are consistent with the philosophy and process adopted. Not sure quite what they are 'bets' against given that these funds don't benchmark to an equity index. Personally I think that wealth preservation is a more easily understood and accurate term than 'low volatility funds which may hold a lot of bonds or value stocks'. Note that holding significant conventional bonds at present might not be a good way to preserve real wealth.....or even nominal wealth. 

Here's how PAT describes its philosophy:

Our policy is to protect and increase (in that order) the value of shareholders’ funds per share over the long term.

I don't see any of these funds referring to themselves, or promoting themselves as 'wealth preservation', which argues against your final paragraph. As I said, the term has been coined by others. 

Secret2ndAccount

Yes, I think most of the short, sound-bite names that we give to things would fall apart under scrutiny.
If I buy growth stocks does that mean I'm not interested in getting value? If I opt instead for value stocks should I not expect any growth? And who do I call if my fixed income fund turns out to offer variable income.
These are names that attempt, in a few words, to describe the strategy of the product. We shouldn't assume that success is guaranteed, and our life skills should lead us to expect any product to come with an optimistic name designed to appeal to our vanity, dreams and insecurities. Ford offers me a Taurus or a Sierra, not a Skunk or a Cliff-Edge. And Vanguard's funds are called LifeStrategy, not NoIdea

Thrugelmir

Deleted_User said:

MarkCarnage said:

Deleted_User said:

MarkCarnage said:

Calling the fund “wealth preservation” and aiming for “no loss” is smart.  Bernie Madoff used the same tactics.  Not to say its a Ponzi scheme. They are certainly taking major bets though. UK is the largest allocation.  Japan second.  Very small  US holding.  Seem to be very secretive; investing in own funds so can’t tell what is their actual asset allocation.  I wouldn’t touch a closed fund like this but thats just my opinion. 

On the assumption that it's Ruffer you are talking about, I don't think that they, or the other WP funds, expect 'no loss' over all and any time periods. If you want that, buy Premium Bonds. What they do show is smaller and shorter drawdowns, less volatility and a desire to preserve capital. 

Comparing Ruffer or other mainstream WP funds with Madoff is egregious and misleading. Closed end funds can't pay new investors with other people's money for a start. 

I don't think that having the UK as the largest allocation is a 'major bet' for this type of fund. It reduces currency risk. Much of it is in IL Gilts or Treasury Bills. Japan is 7% of the fund. 

The investment in own funds is fact, though not sure that makes it secretive per se. The asset allocation does include option strategies which are designed to mitigate credit risk, interest rate/duration risk. 

It did briefly include Bitcoin, which I fundamentally and strongly disagreed with. Glad they sold it. 

I hold several WP funds. They are all there for a purpose in a larger, more equity based portfolio. I'm not under any illusions that they will outperform equity funds long term, or for that matter have 'no loss' in a time of general market stress. However, longer term they have tended to do what they say on the tin. 

Every fund manager and every investor has a desire to preserve capital. At least I never heard one claim they want yo lose capital.  Thats not a distinguishing feature. They use a marketing technique which is reminiscent of Medoff’s, playing on human psyche, but like I say, its not a Ponzi.  

On a side note, they have so much in government bonds that the chance of losing capital (in real terms over lng term) has to be high. 

They have UK as the number 1 allocation for equities.  Thats a huge bet.  What does UK make? 6% of the market?  Limits the types of companies too. Investing in UK stocks does not reduce currency risk.  If pound goes up, costs increase while exports drop, so company becomes less valuable in real terms. Its a risk. 

 

Most indeed I would suggest all, equity managers prioritise long term growth over short/medium term capital preservation. Of course none say they want to lose capital, but they accept, implicitly if not explicitly, that volatility is a risk.....which is somewhat different from 'losing capital'. Losing capital for me is crystallised losses, whether by holdings going bust or bad timing of withdrawal by investors. Therefore I think it is at least in part a distinguishing feature.

All the WP funds hold Government bonds to a significant degree. Currently, they are overwhelmingly in IL Bonds (inflation hedge) or T Bills (cash essentially). Some holds TIPS in preference to UK Linkers, some have derivative overlays to hedge duration/rate risk etc. Yes, there is a chance of losing capital in real terms, whether that chance is 'high' is subjective I suggest, and depends on manager skill in asset allocation changes, hedging these risks effectively etc.

Ruffer currently have UK listed equities as the major allocation within equities, it's 20% of the total fund or so. However, their largest holdings are by no means all plays on the UK economy, though might be challenged on ESG grounds in a couple of cases. You fail your own argument by saying that there is a currency risk, which there is, because most of these holdings generate significant revenue and profits outside the UK. Other  WP funds, e.g. PAT have a more global listed equity portfolio. 

You clearly don't like them, but to compare them to Madoff is I think just wrong. 

Looking under the hood, they are investing in companies with low P/E ratios which partly explains UK tilt.  They are also ignoring Technology, for the same reason.  Thats another bet.  

The likes of GSK and Tesco are boring but stable and profitable companies. That are regulated in one of the most respected stock markets in the world. In an economic downturn their share price isn't going to be impacted anywhere as much as other companies. That's common sense not a bet.  

[Deleted User]

MarkCarnage said:

Deleted_User said:

MarkCarnage said:

Deleted_User said:

MarkCarnage said:

Calling the fund “wealth preservation” and aiming for “no loss” is smart.  Bernie Madoff used the same tactics.  Not to say its a Ponzi scheme. They are certainly taking major bets though. UK is the largest allocation.  Japan second.  Very small  US holding.  Seem to be very secretive; investing in own funds so can’t tell what is their actual asset allocation.  I wouldn’t touch a closed fund like this but thats just my opinion. 

On the assumption that it's Ruffer you are talking about, I don't think that they, or the other WP funds, expect 'no loss' over all and any time periods. If you want that, buy Premium Bonds. What they do show is smaller and shorter drawdowns, less volatility and a desire to preserve capital. 

Comparing Ruffer or other mainstream WP funds with Madoff is egregious and misleading. Closed end funds can't pay new investors with other people's money for a start. 

I don't think that having the UK as the largest allocation is a 'major bet' for this type of fund. It reduces currency risk. Much of it is in IL Gilts or Treasury Bills. Japan is 7% of the fund. 

The investment in own funds is fact, though not sure that makes it secretive per se. The asset allocation does include option strategies which are designed to mitigate credit risk, interest rate/duration risk. 

It did briefly include Bitcoin, which I fundamentally and strongly disagreed with. Glad they sold it. 

I hold several WP funds. They are all there for a purpose in a larger, more equity based portfolio. I'm not under any illusions that they will outperform equity funds long term, or for that matter have 'no loss' in a time of general market stress. However, longer term they have tended to do what they say on the tin. 

Every fund manager and every investor has a desire to preserve capital. At least I never heard one claim they want yo lose capital.  Thats not a distinguishing feature. They use a marketing technique which is reminiscent of Medoff’s, playing on human psyche, but like I say, its not a Ponzi.  

On a side note, they have so much in government bonds that the chance of losing capital (in real terms over lng term) has to be high. 

They have UK as the number 1 allocation for equities.  Thats a huge bet.  What does UK make? 6% of the market?  Limits the types of companies too. Investing in UK stocks does not reduce currency risk.  If pound goes up, costs increase while exports drop, so company becomes less valuable in real terms. Its a risk. 

 

Most indeed I would suggest all, equity managers prioritise long term growth over short/medium term capital preservation. Of course none say they want to lose capital, but they accept, implicitly if not explicitly, that volatility is a risk.....which is somewhat different from 'losing capital'. Losing capital for me is crystallised losses, whether by holdings going bust or bad timing of withdrawal by investors. Therefore I think it is at least in part a distinguishing feature.

All the WP funds hold Government bonds to a significant degree. Currently, they are overwhelmingly in IL Bonds (inflation hedge) or T Bills (cash essentially). Some holds TIPS in preference to UK Linkers, some have derivative overlays to hedge duration/rate risk etc. Yes, there is a chance of losing capital in real terms, whether that chance is 'high' is subjective I suggest, and depends on manager skill in asset allocation changes, hedging these risks effectively etc.

Ruffer currently have UK listed equities as the major allocation within equities, it's 20% of the total fund or so. However, their largest holdings are by no means all plays on the UK economy, though might be challenged on ESG grounds in a couple of cases. You fail your own argument by saying that there is a currency risk, which there is, because most of these holdings generate significant revenue and profits outside the UK. Other  WP funds, e.g. PAT have a more global listed equity portfolio. 

You clearly don't like them, but to compare them to Madoff is I think just wrong. 

RICO has 35% of the equity allocation in the UK vs 6% market cap.  Thats a bet.

Looking under the hood, they are investing in companies with low P/E ratios which partly explains UK tilt.  They are also ignoring Technology, for the same reason.  Thats another bet.  

There are lots of funds designed to lower volatility.  Some are called “low volatility”. Others hold a lot of bonds (eg VLS40).  Yet others invest in value companies.  Value, low vol, mixed asset - all of these are standard transparent non-emotional terms designed to explain investment style. 

“Wealth preservation” funds may be doing the same thing but they don’t make investment style transparent.  Instead they appeal to our inner fears of losing money and use a meaningless advertising term.  And what about people who are not wealthy?  Would they reject their investments?  Do they only take cash from billionaires? Nonsense.  Again, appealing to our vanity as part of a marketing ploy.  

I think the term was coined by others. However, I think it's still a valid and fairly accurate description of what they try to do. Of course there are 'bets' as you call them, but they are consistent with the philosophy and process adopted. Not sure quite what they are 'bets' against given that these funds don't benchmark to an equity index. Personally I think that wealth preservation is a more easily understood and accurate term than 'low volatility funds which may hold a lot of bonds or value stocks'. Note that holding significant conventional bonds at present might not be a good way to preserve real wealth.....or even nominal wealth. 

Here's how PAT describes its philosophy:

Our policy is to protect and increase (in that order) the value of shareholders’ funds per share over the long term.

I don't see any of these funds referring to themselves, or promoting themselves as 'wealth preservation', which argues against your final paragraph. As I said, the term has been coined by others. 

The term was certainly coined by others.  Fairly popular one.  I regularly hear “wealth preservation” ads for magical funds which promise super clever strategies and magical protection.  But Ruffer uses the marketing gimmick and thats bothering me: 

“Ruffer Investment Company (RICA) aims to preserve wealth and tries not to lose money over any 12 month period”

https://www.ruffer.co.uk/en/thinking/articles/press/investor-chronicle-podcast---a-ruffer-guide-to-preserving-wealth-and-making-positive-returns

What  are they betting against?  They are betting against the market.  I also have some TIPS. I also have an allocation to value stocks.  I am also underweight US and technology. That still leaves US as the largest country allocation in my portfolio.  They have zero technology. They have a tiny US allocation. I have home bias but nothing like RICO. 

They could be right for all I know.  In many cases I think they are right.  But I allow for a possibility that I am wrong.  So I tilt portfolio but its diversified.  They don’t allow for a possibility of being wrong.  What if Tech and US continue with their momentum?  What if Japan continues to suck? They take massive bets against the market. 

[Deleted User]

Note that holding significant conventional bonds at present might not be a good way to preserve real wealth.....or even nominal wealth. 

Agreed but linkers and TIPS guarantee negative returns in real terms. and its a bet  on inflation being higher than expected. So they are not going to preserve your “wealth” either

Thrugelmir

Deleted_User said:

Note that holding significant conventional bonds at present might not be a good way to preserve real wealth.....or even nominal wealth. 

Agreed but linkers and TIPS guarantee negative returns in real terms. and its a bet  on inflation being higher than expected. So they are not going to preserve your “wealth” either

With US inflation hitting 5.4% yesterday. Looks like the correct short term call has been made. To tame inflation will the US have to raise interest rates early than expected. This would then strengthen the exchange rate for overseas investors.  A good trade  to have taken up when inflationary pressures were on the agenda around this time last year.