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lower risk funds - and/or stop loss?

Probably a dumb question - and I'm certainly a beginner where it comes to funds - but I'll be looking to add more cash to my ISA's... (or near cash equivalents) in the next month, and I'm wondering if there is an alternative to cash that would beat an "easy access ISA"?
I've looked at Royal London Short Term Money Market Y Acc.... which i think would beat a typical easy access ISA even after dealing costs, and might not be far short of the average fixed rate ISA deal?  I'm leaning towards something like this.
But... is there such a thing as a fund (if I'm using that term correctly) that has some sort of built-in stop-loss concept?  E.g. i wouldnt mind risking the interest if i knew my capital was safe, or could only drop by 5% for example. i just don't want to be in a position where i lost 20-30% of my ready cash in a hurry..... I don't have enough spare cash to lock it up for the best fixed interest rate deals.
I do have riskier (and longer term) investments & pension funds... I'm just not sure what to do with the cash (which will probably max out in the region of £15-25k.
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Comments

  • Not a dumb question at all.

    There are funds that claim to be lower risk, sometimes referred to as wealth preservation funds, whilst there are also "absolute return" funds which aim to generate positive returns whatever the market is doing.

    However performance of some of these has been absolutely diabolical, and they've failed to deliver their mandate (in some cases falling sharply). 

    As such the silver bullet you are looking for - something which will deliver better returns than the risk free rate, but without any risk - doesn't exist.


  • gravel_2
    gravel_2 Posts: 594 Forumite
    Seventh Anniversary 500 Posts Name Dropper Combo Breaker
    An MMF like you have mentioned or an ETF like ERNS or CSH2 should in theory give you a low risk return correlated to the the BOE rate. You're not going to get better returns without risk, and certainly you won't get a guarantee of any return if you do accept risk.

    Of course if you expect the BOE rate to drop then a fixed rate cash ISA or (shorter) gilts might be attractive if you want certainty of return over a longer period than a couple of months.
  • Linton
    Linton Posts: 17,938 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    Wealth Preservation funds with a stated an objective of at least matching inflation over the medium term were useful when interest rates were very low.  However I believe now interest rates are higher your best bet is more likely to be a STMMF or a very short dated gilt fund. For protection over periods of up to say 5 years I would seriously consider PBs or bank savings accounts.

    Stop loss policies are not guaranteed to work - if prices drop quickly there may not be time to catch the trigger point.

  • As such the silver bullet you are looking for - something which will deliver better returns than the risk free rate, but without any risk - doesn't exist.

    Thanks... appreciate the explanation, tho' to be clear i wasn't looking for better returns that the risk free rate, i'd accept some volatility, just wanted to protect the principal.
  • gravel_2 said:
    An MMF like you have mentioned or an ETF like ERNS or CSH2 should in theory give you a low risk return correlated to the the BOE rate. You're not going to get better returns without risk, and certainly you won't get a guarantee of any return if you do accept risk.

    Of course if you expect the BOE rate to drop then a fixed rate cash ISA or (shorter) gilts might be attractive if you want certainty of return over a longer period than a couple of months.

    Thanks.  Have googled those. understand the risk comments.
  • As I understand it, that Royal London mmf you mention is one of the best and guarantees you currently a 5.2% return and your capital won’t fall, but you need to keep an eye on interest rates, when they fall so too will the mmf yield. I guess you can continue to hold at the lower yield or sell as long as everyone else isn’t selling too.
  • eskbanker
    eskbanker Posts: 35,345 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    As I understand it, that Royal London mmf you mention is one of the best and guarantees you currently a 5.2% return and your capital won’t fall...
    No, that's definitely not the case, as confirmed in the datasheet:
    The fund is not a guaranteed investment.

    Principal Fluctuation

    An investment in the fund is different from an investment in deposits. The principal invested in the fund is capable of fluctuation in value.
  • eskbanker said:
    As I understand it, that Royal London mmf you mention is one of the best and guarantees you currently a 5.2% return and your capital won’t fall...
    No, that's definitely not the case, as confirmed in the datasheet:
    The fund is not a guaranteed investment.

    Principal Fluctuation

    An investment in the fund is different from an investment in deposits. The principal invested in the fund is capable of fluctuation in value.
    I stand corrected..do mmf’s often lose capital value then?
  • eskbanker
    eskbanker Posts: 35,345 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    eskbanker said:
    As I understand it, that Royal London mmf you mention is one of the best and guarantees you currently a 5.2% return and your capital won’t fall...
    No, that's definitely not the case, as confirmed in the datasheet:
    The fund is not a guaranteed investment.

    Principal Fluctuation

    An investment in the fund is different from an investment in deposits. The principal invested in the fund is capable of fluctuation in value.
    I stand corrected..do mmf’s often lose capital value then?
    This one's had a couple of small losses and a couple of flat years:

  • when i read the fund data sheet i noticed there was a 0.18 fund charge.   So when interest rates were very low that would make a difference. But in most cases the fund seems to outperform the market (just), which is a little suprising.
    P.s. I assume that 0.18% charge is not something i pay directly, but is just reflected in the net growth rate.
    so all i have to pay is a £1.50 dealing charge each time i buy/sell that fund.
    As far as i can see I'm adding a tiny bit of risk... but getting most of the benefit of cash savings.
    And i understand that interest rates are likely heading down at this stage.
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