SVB collapse

GazzaBloom

GeoffTF said:

GazzaBloom said:
My uncertainty would be when to switch drawdown from stock funds portfolio to the cash in times like this week...do you let the week ride out, the month, the quarter or the year? Do you set a losses trigger point, 5%? 10%, 20%...??

A sensible plan is to take income from whichever is above your target percentage allocation, either from equities or cash/bonds. It is called cash flow rebalancing

My point is more around when you make those decisions? is annually too long, 6 monthly? quarterly?

GazzaBloom

US stocks bouncing back up now, especially Tech!

UK not having any of it though...

Michael121

Interesting that gold, silver and btc is up 2,6 and 13%. 

bostonerimus

SVB was not diversified and was forced to sell bonds at a loss. Then a twitter thread started a panic and lots of VCs and businesses withdrew their money and the bank couldn't keep up ie a classic "bank run". The Feds have guaranteed all depositors, even the ones over $250k and if a buyer can be found they will pay or the assets will be sold to pay the depositors. HSBC has bought the UK bit of SVB. The losers here will be the shareholders, which is as it should be. The employees got their bonuses before the Feds closed things down and have been offered 45 days and 1.5 years in salary as severance. So the immediate danger is over. Now there needs to be some stress testing in the system and maybe people won't be so quick to argue for less regulation, although I won't hold my breath on that one.

Malthusian

GeoffTF said:

Look at the Portfolio Statement. Your money is invested in bank bonds. In the SVB collapse, the depositors kept all their money, but the shareholders and bond holders lost all of theirs. 

Very short term money market instruments, spread across numerous banks and short term government bonds. The risk of any noticeable loss due to a bank failure should be minimal. Can you find any money market funds that have gone down noticeably after the SVB collapse?
Back in 2008 Standard Life put some of its money market fund in mortgage-backed bonds, causing the fund to lose 5% of its value in the credit crisis, and it had to pump £100 million of its own money into the fund to make good the loss. (However, no investors in money market funds lost money as a result of Lehman Brothers, Bear Stearns, Northern Rock etc etc going under.)
If you are certain that all your money in your S&S ISA cash account is under the £85k limit (let's say because you have £20k in cash in the S&S ISA and £20k in cash elsewhere), that is safer than a money market fund. But a money market fund is safer than having money over the FSCS limit.
If you have £85k in Bank X and £50k in your S&S cash account, and your S&S ISA provider is currently putting client money with Bank Y, that is not safe because your S&S ISA provider could at any time decide to put client money with Bank X, without you knowing about it. 

Albermarle

Sea_Shell said:

Personally, I'm sitting on my hands.

Watching Bloomberg is quite interesting.

As they say Oop North - If in doubt do nowt !

GazzaBloom

GeoffTF said:

GazzaBloom said:
My uncertainty would be when to switch drawdown from stock funds portfolio to the cash in times like this week...do you let the week ride out, the month, the quarter or the year? Do you set a losses trigger point, 5%? 10%, 20%...??

A sensible plan is to take income from whichever is above your target percentage allocation, either from equities or cash/bonds. It is called cash flow rebalancing.

Just Googled cash flow rebalancing and it's not a concept I was familiar with as I a currently in accumulation only into 100% stock funds. Thanks for the heads up, will be needed in decumulation down the road.

GeoffTF

GazzaBloom said:

GeoffTF said:

GazzaBloom said:
My uncertainty would be when to switch drawdown from stock funds portfolio to the cash in times like this week...do you let the week ride out, the month, the quarter or the year? Do you set a losses trigger point, 5%? 10%, 20%...??

A sensible plan is to take income from whichever is above your target percentage allocation, either from equities or cash/bonds. It is called cash flow rebalancing

My point is more around when you make those decisions? is annually too long, 6 monthly? quarterly?

It is not going to matter much. If you withdraw money monthly, that will cost you £5 x 12 = £60 p.a. with iWeb. You can save £55 by withdrawing annually, but then you have to carry cash to tide you over during the year. If your portfolio is earning 1% more than cash, break-even is withdrawing £5,500 per year. You can put your own numbers in here. (Pound cost averaging works in reverse when you are withdrawing, by the way.)

GeoffTF

Malthusian said:

GeoffTF said:

Look at the Portfolio Statement. Your money is invested in bank bonds. In the SVB collapse, the depositors kept all their money, but the shareholders and bond holders lost all of theirs. 

Very short term money market instruments, spread across numerous banks and short term government bonds. The risk of any noticeable loss due to a bank failure should be minimal. Can you find any money market funds that have gone down noticeably after the SVB collapse?

I would not expect that. The ETFs have shown some erratic behaviour in the past. Royal London has been much better. It had two very small one day down spikes in 2008, but that is it. I do not know much about the investments in the annual report, but I expect that they would be treated as senior bonds rather than deposits. I would be pleased to be told that that is wrong though.

Brokers usually split client cash over several banks, but I do not know what iWeb does.

Sea_Shell

Markets getting a little jittery about Credit Suisse.


(Has a post been removed, or am I going mad?)