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Defensive funds - any suggestions
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@ Ryan
One thing we agree on is P2P as a bond/defensive alternative. However you won't be getting 6% from Ratesetter unless you are either a non tax payer or are not declaring your income to her magistracy's finest?
I don't see how an equity fund could be seen as defensive? Its a high risk fund and is detailed as so on the key investor information booklet.
Yeah, going for 6.2% at the moment on RateSetter, but before tax (although anticipating reforms in the way it's taxed ... the benefits to the UK economy would seem vast if we could create a whole culture of small business lending)
Well it does depend on time-scale, but certainly in today's markets equities look to have the preferable risk/reward profile (next to cash and perhaps equivalents like P2P lending)
Murray International is bumpy (because it's so exposed to emerging markets and asia) but it tends to ride out crashes like relatively minor bumps in the road, and the income can take a lot of the sting off
When you see what the 2009 crash does to equity markets, it seems to hammer everything ... but often from quite different starting points ... So I suppose if you're relatively equal-weight between a lot of very different economies, it can smooth out those big drops (and you can certainly find bond and property funds which have taken bigger hits)
Woodford's very exposed to pharmaceuticals - and again there the idea is that even in a crash, people are still paying for their asthma medications, chemotherapy drugs and statins, and as long as you avoid really overvalued areas, they don't tend to experience much downside0 -
I realise that I am wildy overstating my case but I always bear the following in mind:
1. Many financial journalists know less than me
2. For every expert who thinks now is a good time to sell there is another who thinks that it is a good time to buy - that is why shares/bonds are bought & sold.
3. Fund managers are in essence salesmen and want to get hold of your money
4. Most investors are like lemmings and just follow the lead of the others.
5. History doesn't guarantee the future but it is a reasonable guide as to who has got some sort of feel for what is happening.
6. Know where you stand on the risk/rewards question and take it into account. If you lost, even temporarily say 20% of your money could/would you accept that or would you really be happier with less reward but more certainty.
7. Don't confuse risk & volatility. Most people I speak to think that they are the same thing. They are not.
My view? Both shares and bonds are in general overpriced. Add in the Greek/Euro situation, Russia, a UK General election, the reality that US interest rates will rise sooner rather than later, a lack of liquidity to resolve bond market issues when the current euphoria is disturbed and many other factors. In my view between now and at least Mid May - and probably well beyond - cash is King but not necessarily sterling. Of course there is someone else who will say the complete opposite and this is just my opinion that should never be relied upon, nor valued, for any purpose whatsoever. My opinion might also be completely different tomorrow if something changes!
That should give you something to think about! I am now going to duck awaiting the responses.0 -
Sounds spot on to me ... Woodford's saying much the same: the US needs to tread very carefully with rates this year; UK general election could upset markets; Greek exit will probably hit the global economy hard; Russia could be heading us towards a new full-blown cold war
But on the other hand ... we've got another major injection of QE to come, which could keep asset prices inflated for some time (and possibly even fix the Eurozone economy), while the US is continuing stealth QE; the Conservatives are quite likely to win with Labour losing Scottish support; it's in no one's interest for Greece to exit; and Russia probably want to find a way out of the problem they're in
So a time of great caution (which perhaps isn't priced into developed markets at the moment ... quite why the FTSE 100's floating around 6,800 against this backdrop?)
But unfortunately not a time of quite such fantastic valuations
It's cash and patience over here, with a side order of P2P lending to tide us over0 -
Ryan_Futuristics wrote: »...
It's cash and patience over here, with a side order of P2P lending to tide us over
Or simply carry on the same in the knowledge that in 5 years time most of our current worries will be resolved one way or another and there will be a whole host of new ones we havent even dreamt about.0 -
As I said at any point in time someone thinks it is the time & price to sell and someone else thinks that it is the time & price to buy. They make a deal.
There will not be universal agreement here0 -
Is that an extended example of my rule 3 (post 13) - Fund managers are salesmen?0
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Or simply carry on the same in the knowledge that in 5 years time most of our current worries will be resolved one way or another and there will be a whole host of new ones we havent even dreamt about.
That doesn't mean close your eyes
Stripping everything else away, there are two constants that will always exert a long-term influence on your returns: the fees you pay, and the valuations you buy at ...
We talk about low rates: we're talking about very expensive bond valuations; we talk about the US raising the rates, we're talking about significant downside risk on overbought assets ... Follow the herd so far and you'll find yourself falling down a cliff-face
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Perhaps I should re-post the question on what your views are on whether a crash is likely to happen. There is a certainly no shortage of gloom merchants whenever you read the financial pages and it makes me jittery. As I've said my investment time frame is 10 years so I don't have the luxury of time to ride out the storm.
The problem isn't when everyone says it's a bad time to invest, the problem is when it's universally agreed it's perfect.
Everyone bailed out in 2009 but that was the time to pile in. I don't think things ate overvalued at the moment, I'm sure there will be bumps along the way but I can't see the point in holding cash waiting until there's a crash. If it happens how do you know it's the bottom etc.Remember the saying: if it looks too good to be true it almost certainly is.0 -
(i) For defensive equities, consider Personal Assets Trust and Ruffer Investment Company.
(ii) For defensive cash, consider interest-bearing current accounts.
(iii) If you have access to a safety deposit, consider some gold sovereigns - free of CGT, they are.Free the dunston one next time too.0
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