Is what I am doing sensible? What would you do

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81977163#Comment_81977163

To add to this maybe worth noting that after the dot.com crash, the S&P 500 took 8 years to recover. At which point if hit the GFC and took another 6 years to recover.

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/81977172#Comment_81977172

and another example…..

If you were invested on 01/01/2000 you were still down in value 10 years later. (breakeven was around 12 years)

Storcko14

Galbraith's Great Crash 1929 is well worth a read as a) an excellent run-through of a historical period (the roaring 20s, great depression & rise of fascism) that has relevance today and b) as a reminder of what equity crashes really are, as in - they're not always v-shaped.

NormalNorman

Money to the masses did a podcast on Coast FIRE. Might be worth a listen.

Certainly we have backed off hammering pensions to the extreme eg 100% of wife’s salary into pension, myself heavily salary sacrificed etc.

Although wife now sacrifices down to NMW and myself down to the HRT threshold we are focusing much more on our ISAs to bridge with the benefit of no PAYE tax code.

Such is the 20% band so narrow now you need a scalpel to fine tune efficiency, for us it’s get any allowances added to your tax code whilst reducing/bining some outgoings. Even sold my EV a few years ago to save more money!

Cheers.

plumb1_2

https://forums.moneysavingexpert.com/discussion/comment/81977471#Comment_81977471

is that cash isa’s or s&s equity isa’s

Mistermeaner

https://forums.moneysavingexpert.com/discussion/comment/81976634#Comment_81976634

thanks, I appreciate the input

it’s my lack of understanding I acknowledge - can you help me understand what the benefits of gilts, gilt funds or fixed interest funds would be …. Looking at charts they don’t seem to offer any protection at all and certainly charts for last 5 years look really ugly

I guess I just don’t understand how a gilt can lose value; you pay an amount to buy it (say £1) and aiui it pays you a coupon (interest) I presume at whatever % is quoted annually (eg LSE TR27 4.25% treasury gilt costs ~£1 and pays you 4.25pence each year then on maturity at 7th dec 2027 you get your £1 back ???) - so how on earth can a fund holding these things go down in value? If I bought this thing today will it perform per my understanding above ?

how does an index linked gilt work? I would presume like the fixed interest gilt but the coupon is rpi or cpi or whatever rather than fixed…. Again I just don’t understand how these things can drop in value but the charts seem to suggest that they have and substantially too

this is why I have 400k in money market as I understand them ! And they seem to not suffer the drops and risk that bond funds fixed interest funds and gilt funds have …. My objective is to preserve capital and without risk protect against inflationary erosion as best as possible and I struggle to see how bonds and gilts will help with that vs money market

thanks

Veloflyer

Gilt funds invest in a collection of gilts. The price of which varies according to market forces, interest rates etc etc.

Investing in individual gilts are also subject to the above, but if you hold them to maturity, very broadly speaking, you get your money back plus a bit of interest - the coupon. Index-linked gilts are similar, but you get less coupon. However index-linked gilts are adjusted for inflation.

Whether you buy conventional or IL gilts is another topic altogether

Link below

A beginner's guide to gilts

Storcko14

Monevator has covered this in the past. https://monevator.com/index-linked-gilts-hedge-inflation/ is worth a read.

In essence a gilt fund is trading gilts so as to maintain a target duration mandate for the fund. So depending on when you buy in and sell out, you could gain or lose. No certainty in other words. If you hold individual gilts to maturity you know exactly what income (coupon) you'll get plus what principal you'll get back and when. So you'd have certainty. An index-linked gilt adds inflation proofing - as long as you don't buy a gilt that has a negative yield to maturity. In that case the price of the gilt has been bid up to such an extent that its future cashflows would result in a loss at maturity.

Mistermeaner

thanks both I’ll have read of the links when I get some time later

Quick q though why would anyone buy a negative yield gilt?

af1963

https://forums.moneysavingexpert.com/discussion/comment/81978106#Comment_81978106

To protect against an even more negative possible return from other investments.

You might have plenty of money for the rest of your life even if it loses 1% per year, but wouldn't have enough if it was in the stock market and lost 40% in a crash.