FTSE100 tracker
Discussion
Ari said:
Almost reduced to £1,000 down
You contributed and withdrew £20,855.00
Your investments returned you ?£1,194.20
You ended up with £19,660.80
Your rate of return is -10.24%
Still thinking long term...
A sudden and unexpected jump in three days! You contributed and withdrew £20,855.00
Your investments returned you ?£1,194.20
You ended up with £19,660.80
Your rate of return is -10.24%
Still thinking long term...
You contributed and withdrew £20,855.00
Your investments returned you −£556.47
You ended up with £20,298.53
Your rate of return is -4.80%
Getting very close to breaking even - for now at least!
Ari said:
Getting very close to breaking even - for now at least!
I was looking forward to my daughter's Vanguard fund holding breaking even this week. It's at £-3.13 today. Unfortunately the way things are looking it won't be this week. Still, she has another 9 years to wait it out.Okay so, here is the million dollar question (and I appreciate that no one can answer it, but interested in thoughts/opinions).
I'm now seriously considering buying a bigger house next year. If I do, I'd rather cash out of this and put it toward buying the house (because it seems nonsensical to me to borrow money to invest - which effectively what I'd be doing. Every pound in investment instead of in the house is a pound extra borrowed instead).
So, if it does break even tomorrow, do I cash it all out and put it in the 'going to buy a house' fund?
Point is, if I am going to use this (plus savings plus a mortgage plus value of current house) next year, then this is no longer a long term strategy, and arguably therefore a bad place for what has just become short term savings.
I'm now seriously considering buying a bigger house next year. If I do, I'd rather cash out of this and put it toward buying the house (because it seems nonsensical to me to borrow money to invest - which effectively what I'd be doing. Every pound in investment instead of in the house is a pound extra borrowed instead).
So, if it does break even tomorrow, do I cash it all out and put it in the 'going to buy a house' fund?
Point is, if I am going to use this (plus savings plus a mortgage plus value of current house) next year, then this is no longer a long term strategy, and arguably therefore a bad place for what has just become short term savings.
The FTSE or any 100% equities investment isn't the place to be for money you need in a years time IMO.
Simply put if you have £100 in there today how would you feel if you see your dream home and there's only £65 in there?
Dial the risk down if you need to be sure your original capital is preserved.
Simply put if you have £100 in there today how would you feel if you see your dream home and there's only £65 in there?
Dial the risk down if you need to be sure your original capital is preserved.
Ari said:
So, if it does break even tomorrow, do I cash it all out and put it in the 'going to buy a house' fund?
Point is, if I am going to use this (plus savings plus a mortgage plus value of current house) next year, then this is no longer a long term strategy, and arguably therefore a bad place for what has just become short term savings.
I think traditional portfolio theory would say 'sell it all'. You don't have a long enough time horizon to deal with the volatility.Point is, if I am going to use this (plus savings plus a mortgage plus value of current house) next year, then this is no longer a long term strategy, and arguably therefore a bad place for what has just become short term savings.
The alternative is to dollar cost average on the way out (i.e. sell £x per month) which de-risks you over time.
But... given just how cheap mortgages are likely to be, up to some low LTV (<50% maybe) it is tempting to try and play for a bit of spread. Doesn't have to be equities either.
Fag packet calculation puts your valuation today at £20,622.62 - so a couple of hundred short of break-even.
My personal view is that the indexes have recovered too quickly and will retrace in the short term. We have a recession to deal with and Brexit. I also think we might hit 7000 soon with a good tail wind.
If you need the cash to improve your affordability / reduce interest rate, it makes sense to cash in.
Mortgage cash is generally cheap to borrow. Also, in terms of spreading investments you don't want property to be your only investment - there's a good chance that the housing market is due a correction.
There are various options here - cash in at break even, wait and cash in at +5%, cash in 50% at break even with 1/2 into property and 1/2 remaining in ISA. The other option is to move some or all of the money into a SIPP and gain the tax benefit. Also, you could change from a Tracker to a Vanguard 80% for example.
Many permutations of what you could do.
My personal view is that the indexes have recovered too quickly and will retrace in the short term. We have a recession to deal with and Brexit. I also think we might hit 7000 soon with a good tail wind.
If you need the cash to improve your affordability / reduce interest rate, it makes sense to cash in.
Mortgage cash is generally cheap to borrow. Also, in terms of spreading investments you don't want property to be your only investment - there's a good chance that the housing market is due a correction.
There are various options here - cash in at break even, wait and cash in at +5%, cash in 50% at break even with 1/2 into property and 1/2 remaining in ISA. The other option is to move some or all of the money into a SIPP and gain the tax benefit. Also, you could change from a Tracker to a Vanguard 80% for example.
Many permutations of what you could do.
Ari said:
Okay so, here is the million dollar question (and I appreciate that no one can answer it, but interested in thoughts/opinions).
I'm now seriously considering buying a bigger house next year. If I do, I'd rather cash out of this and put it toward buying the house (because it seems nonsensical to me to borrow money to invest - which effectively what I'd be doing. Every pound in investment instead of in the house is a pound extra borrowed instead).
So, if it does break even tomorrow, do I cash it all out and put it in the 'going to buy a house' fund?
Point is, if I am going to use this (plus savings plus a mortgage plus value of current house) next year, then this is no longer a long term strategy, and arguably therefore a bad place for what has just become short term savings.
If I were in your position... my major concern would be having all of my money in a UK asset, in a (IMO) pretty useless currency whilst also earning my living in that same currency. I'd be borrowing the maximum I could still comfortably afford, diversifying into markets outside of the UK and not exposing myself to that risk. Of course you could look like an idiot if UK house prices rocket and sterling strengthens. I just can't see either of those things happening tbh.I'm now seriously considering buying a bigger house next year. If I do, I'd rather cash out of this and put it toward buying the house (because it seems nonsensical to me to borrow money to invest - which effectively what I'd be doing. Every pound in investment instead of in the house is a pound extra borrowed instead).
So, if it does break even tomorrow, do I cash it all out and put it in the 'going to buy a house' fund?
Point is, if I am going to use this (plus savings plus a mortgage plus value of current house) next year, then this is no longer a long term strategy, and arguably therefore a bad place for what has just become short term savings.
Edited to add that the FTSE itself has been well hedged against currency depreciation in recent times.
Edited by Ligne on Friday 5th June 21:14
Ligne said:
my major concern would be having all of my money in a UK asset, in a (IMO) pretty useless currency whilst also earning my living in that same currency ..diversifying into markets outside of the UK and not exposing myself to that risk.
I think there are two different issues here. One is diversifying away from UK macroeconomic risk and the second is diversifying from GBP.When all your assets and liabilities are GBP denominated (i.e. you live in the UK and always expect to), then introducing another currency for the sake of it to me adds risk rather than removes it. I agree on your second point that getting exposure to other non-correlated economies is a good idea.
bhstewie said:
The FTSE or any 100% equities investment isn't the place to be for money you need in a years time IMO.
Simply put if you have £100 in there today how would you feel if you see your dream home and there's only £65 in there?
Dial the risk down if you need to be sure your original capital is preserved.
Simply put if you have £100 in there today how would you feel if you see your dream home and there's only £65 in there?
Dial the risk down if you need to be sure your original capital is preserved.
Kind of my thinking, thanks.
I'm actually thinking, take half out, that way it halves any potential losses without removing me completely from any gains.
NickCQ said:
I think traditional portfolio theory would say 'sell it all'. You don't have a long enough time horizon to deal with the volatility.
The alternative is to dollar cost average on the way out (i.e. sell £x per month) which de-risks you over time.
But... given just how cheap mortgages are likely to be, up to some low LTV (<50% maybe) it is tempting to try and play for a bit of spread. Doesn't have to be equities either.
Indeed, but my philosophy (rightly or wrongly) has always been, clear any and all debt as stage one. Then start saving/investing.The alternative is to dollar cost average on the way out (i.e. sell £x per month) which de-risks you over time.
But... given just how cheap mortgages are likely to be, up to some low LTV (<50% maybe) it is tempting to try and play for a bit of spread. Doesn't have to be equities either.
Chris Type R said:
Mortgage cash is generally cheap to borrow. Also, in terms of spreading investments you don't want property to be your only investment - there's a good chance that the housing market is due a correction.
This is why I'm not going to buy until next year at the earliest - it feels like a perilous time to buy property right now, even if it is to live in. Ligne said:
If I were in your position... my major concern would be having all of my money in a UK asset, in a (IMO) pretty useless currency whilst also earning my living in that same currency. I'd be borrowing the maximum I could still comfortably afford, diversifying into markets outside of the UK and not exposing myself to that risk. Of course you could look like an idiot if UK house prices rocket and sterling strengthens. I just can't see either of those things happening tbh.
Edited to add that the FTSE itself has been well hedged against currency depreciation in recent times.
Interesting, thanks Edited to add that the FTSE itself has been well hedged against currency depreciation in recent times.
Edited by Ligne on Friday 5th June 21:14
NickCQ said:
I think there are two different issues here. One is diversifying away from UK macroeconomic risk and the second is diversifying from GBP.
When all your assets and liabilities are GBP denominated (i.e. you live in the UK and always expect to), then introducing another currency for the sake of it to me adds risk rather than removes it. I agree on your second point that getting exposure to other non-correlated economies is a good idea.
Clearly a lot to think about! When all your assets and liabilities are GBP denominated (i.e. you live in the UK and always expect to), then introducing another currency for the sake of it to me adds risk rather than removes it. I agree on your second point that getting exposure to other non-correlated economies is a good idea.
Ari said:
Kind of my thinking, thanks.
I'm actually thinking, take half out, that way it halves any potential losses without removing me completely from any gains.
I've found I'm happier having larger amounts invested by simply not being 100% equities.
So if you have a £100K pot you could put £40K in equities and keep the rest in cash or put the entire £100K in something like LifeStrategy 40 or Troy Trojan or 50/50 stocks and bonds etc.
Though even then I'd be hesitant with a timeline of only a year as I don't think you'll see any investment products of that type promoted with such a short recommended holding period precisely because think where you'd be if you'd done that a year ago.
Just a personal view but I would still go global rather than only investing in the FTSE100 especially if the aim is growth.
bhstewie said:
Perhaps also look at other options too that aren't so volatile.
I've found I'm happier having larger amounts invested by simply not being 100% equities.
So if you have a £100K pot you could put £40K in equities and keep the rest in cash or put the entire £100K in something like LifeStrategy 40 or Troy Trojan or 50/50 stocks and bonds etc.
Though even then I'd be hesitant with a timeline of only a year as I don't think you'll see any investment products of that type promoted with such a short recommended holding period precisely because think where you'd be if you'd done that a year ago.
Just a personal view but I would still go global rather than only investing in the FTSE100 especially if the aim is growth.
I broadly agree with this...equity is dangerous when you have a short timeline.I've found I'm happier having larger amounts invested by simply not being 100% equities.
So if you have a £100K pot you could put £40K in equities and keep the rest in cash or put the entire £100K in something like LifeStrategy 40 or Troy Trojan or 50/50 stocks and bonds etc.
Though even then I'd be hesitant with a timeline of only a year as I don't think you'll see any investment products of that type promoted with such a short recommended holding period precisely because think where you'd be if you'd done that a year ago.
Just a personal view but I would still go global rather than only investing in the FTSE100 especially if the aim is growth.
I've never been overly focused on FTSE....I've worked for US companies for 30+ years, and the UK is broadly 6% of 'the world' in terms of funds, so I have no direct FTSE-only investments.
......but it did make me think: I have to say I was slightly surprised when I checked the past 12-month performance of my main pot of funds (to Aviva May statements):
'Pre-retirement Fixed Interest': +13.44%
15 Year Gilt Index Tracker: +25.97% (even I had to double check that one....)
North American: +5.58%
World ex UK tracker: -0.19%
The first two are my 'less risky' half.....and have done far better than I might have expected (over 12 months.....over 3-10 years, a bit less than the second two).
Of course, none of us know if we are in "dead cat bounce" territory (Covid fallout could be deep and long), but it is interesting stuff.....& VERY difficult to call.
Derek Chevalier said:
mikeiow said:
I broadly agree with this...equity is dangerous when you have a short timeline.
Do you not think the same might be true of the bond funds you mentioned?Until earlier this year, I had some % in a specific bond tracker.....those took a ~20% dip from peak to trough earlier this year. Climbed back to peak, & I took a decision to shuffle out & simplify.
Certainly the "pre-retirement fixed interest" acct has a chunk of bonds in. That, along with the gilt tracker, "suffered less" from peak to trough.
But sure....anything not in cash can be at the vagaries of any crash/recession/depression.
What do you think the best solution is, Derek?
mikeiow said:
Which bond funds?
This one in particular:15 Year Gilt Index Tracker: +25.97%
I don't think there's necessarily any "correct" solution, as long as you are aware of the inherent risks (and feel you are being rewarded sufficiently for the risk) in the bond world (credit and interest rate sensitivity) and what may cause those risk to trigger.
https://rm.morningstar.com/education/basic/LS_Bas_...
This was useful to put the recent events in context.
https://monevator.com/do-us-treasury-bonds-protect...
and more info on portfolio protection.
https://monevator.com/how-to-protect-your-portfoli...
Edited by Derek Chevalier on Monday 8th June 18:40
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