Recession proof investments
Discussion
digger_R said:
btdk5 said:
Have you thought about looking at structured products? Can be a good choice if you’re worried about volatility.
They won’t compound but they do give you a known or guaranteed bonus. You can get pretty defensive structures providing yields of 6-8% up to aggressive structures giving double digit returns.
would be very interested to hear more about this. They won’t compound but they do give you a known or guaranteed bonus. You can get pretty defensive structures providing yields of 6-8% up to aggressive structures giving double digit returns.
Some really valuable discussion here - I'm also in the camp that believes we are in a different economic paradigm with significantly more money being printed.
As someone who is not thinking over this day and night - I'm looking for a way to invest in a meaningful way for my long term future without losing too much sleep!
The first and most important question any retail investor should always ask themselves when an investment is put in front of them is this: ‘ Why is little, old, humble, unimportant me being offered this opportunity, how come no bank, fund, institutional or HNW individual has taken this or kept this for themselves?’
The answer beyond a sensible level of return that is defined by either the global stock market or global lending is that you are being offered an abnormally high level of return because you are considered to be a f
king idiot who’ll buy penny chews for a £1. 
With SPs you really need to focus on the small print that defines the investment criteria. In an ideal world what you want to be doing is locking in future stock market returns at a fixed rate and also in exchange for taking that fix receiving lower risk on your capital than if you just invested it yourself in the same markets to get the predicted higher returns but with the risk of not getting those high returns (if that makes sense as I’ve worded it a bit poorly). In reality, most SPs today don’t bother giving any credible downside protections (which you’re still paying for) because they don’t have to as customers have just been hurling billions into the offshore invisible bamboo market for much higher imaginary returns.
Sheepshanks said:
To be fair, people have been suggesting a downturn was coming for years. Meanwhile the markets have boomed.
My own system, which has worked for 30 years, has been to always be continually invested. We never know what the market is going to do.
There are obviously ups and downs in the stock market, but when upward movements do occur, they are often unexpected and rapid. To be out of the market at those times, can have a significant negative effect upon overall performance. Warren Buffett refers to; 'they lost because they kept dancing in and out of the market'.
I stumbled on this whilst reading some articles on "cash" management.
https://portfoliocharts.com/2019/08/20/the-top-4-p...
https://portfoliocharts.com/2019/08/20/the-top-4-p...
bhstewie said:
hstewie said: I stumbled on this whilst reading some articles on "cash" management.
https://portfoliocharts.com/2019/08/20/the-top-4-p...
Thanks for the article. I've skim-read it and what was illuiminating was the focus on diversification (risk management strategy) of the best performing portfolios during a recession i.e. portfolios comprised of different asset classes (stocks, bonds, REITs, Gold, commodities, cash, etc - not securities in a portoflio within the same asset class e.g. large--cap stocks, small-cap stocks, EM stocks, etc.https://portfoliocharts.com/2019/08/20/the-top-4-p...
DonkeyApple said:
digger_R said:
btdk5 said:
Have you thought about looking at structured products? Can be a good choice if you’re worried about volatility.
They won’t compound but they do give you a known or guaranteed bonus. You can get pretty defensive structures providing yields of 6-8% up to aggressive structures giving double digit returns.
would be very interested to hear more about this. They won’t compound but they do give you a known or guaranteed bonus. You can get pretty defensive structures providing yields of 6-8% up to aggressive structures giving double digit returns.
Some really valuable discussion here - I'm also in the camp that believes we are in a different economic paradigm with significantly more money being printed.
As someone who is not thinking over this day and night - I'm looking for a way to invest in a meaningful way for my long term future without losing too much sleep!
The first and most important question any retail investor should always ask themselves when an investment is put in front of them is this: ‘ Why is little, old, humble, unimportant me being offered this opportunity, how come no bank, fund, institutional or HNW individual has taken this or kept this for themselves?’
The answer beyond a sensible level of return that is defined by either the global stock market or global lending is that you are being offered an abnormally high level of return because you are considered to be a f
king idiot who’ll buy penny chews for a £1. With SPs you really need to focus on the small print that defines the investment criteria. In an ideal world what you want to be doing is locking in future stock market returns at a fixed rate and also in exchange for taking that fix receiving lower risk on your capital than if you just invested it yourself in the same markets to get the predicted higher returns but with the risk of not getting those high returns (if that makes sense as I’ve worded it a bit poorly). In reality, most SPs today don’t bother giving any credible downside protections (which you’re still paying for) because they don’t have to as customers have just been hurling billions into the offshore invisible bamboo market for much higher imaginary returns.
Structured products work perfectly well in flat or falling markets, so if your concern as the thread states is recessionary or falling markets they are worth looking at.
You’re lending your capital to the issuer of the product, say credit Suisse, what they do with it is not your concern. They will offer a defined bonus based on the performance of an underlying asset and partial capital protection. They do this by purchasing a zero coupon bond coupled with a call option.
Will you get any of the upside or dividend income of the underlying. No. But the reason you’re buying is because you don’t think the upside will be big.
Are they offered to HNW individuals - yes. the bank I work for invests £100ms annually for them. They are slightly sophisticated products though, which is maybe why most retail clients haven’t heard of them.
I think Investec offer them at £50k minimum investment, not sure where else offers that low.
"The real risk-reducing move is to diversify away from stocks altogether."
...so long as you don't mind miserable returns during the 90% of time when there ISN'T a recession.
20-25% gold? No way. I've been very happy at 0% for years.
It's easy for the chroniclers of doom to write about recessions after the event but they can't say anything about how and when the next one will arrive. Remember, "big drops" are generally followed by "big recoveries". It's easy to sell on a drop but much harder to pluck up courage and decide when to go back in! My own preference is an overall strategy which doesn't try to avoid the storms completely but hopefully will ride them out.
...so long as you don't mind miserable returns during the 90% of time when there ISN'T a recession.
20-25% gold? No way. I've been very happy at 0% for years.
It's easy for the chroniclers of doom to write about recessions after the event but they can't say anything about how and when the next one will arrive. Remember, "big drops" are generally followed by "big recoveries". It's easy to sell on a drop but much harder to pluck up courage and decide when to go back in! My own preference is an overall strategy which doesn't try to avoid the storms completely but hopefully will ride them out.
With German Bunds going negative yield, things aren't looking too clever.
Brexit no-deal will keep battering the £ for the time being.
BTL does still work but more as HMO's or student lets. I yield anywhere between 5.5% (1 bed houses-always long term lets generally to divorced older people) and 13% self managing. In addition, as Ive only bought at auction and restored myself, Ive generally locked in a buffer against price falls but, again, it takes time and effort.
Have a look at wine as well. Have a look at any asset class that yields more than the bank. As an example, for a few years in the 90's, and when I lived in London, I rented out 2 black cabs with a pal of mine. It made money but more because my pal was a cabbie so knew what he was doing! Dripping into stock market can be done but you need to buy on dips and be brave holding.
Brexit no-deal will keep battering the £ for the time being.
BTL does still work but more as HMO's or student lets. I yield anywhere between 5.5% (1 bed houses-always long term lets generally to divorced older people) and 13% self managing. In addition, as Ive only bought at auction and restored myself, Ive generally locked in a buffer against price falls but, again, it takes time and effort.
Have a look at wine as well. Have a look at any asset class that yields more than the bank. As an example, for a few years in the 90's, and when I lived in London, I rented out 2 black cabs with a pal of mine. It made money but more because my pal was a cabbie so knew what he was doing! Dripping into stock market can be done but you need to buy on dips and be brave holding.
putonghua73 said:
bhstewie said:
hstewie said: I stumbled on this whilst reading some articles on "cash" management.
https://portfoliocharts.com/2019/08/20/the-top-4-p...
Thanks for the article. I've skim-read it and what was illuiminating was the focus on diversification (risk management strategy) of the best performing portfolios during a recession i.e. portfolios comprised of different asset classes (stocks, bonds, REITs, Gold, commodities, cash, etc - not securities in a portoflio within the same asset class e.g. large--cap stocks, small-cap stocks, EM stocks, etc.https://portfoliocharts.com/2019/08/20/the-top-4-p...
This is US biased but something I read about on another site and is definitely worth a look https://www.portfoliovisualizer.com/backtest-asset...
I've always been brought back to land, in particular forest & farming land to-let, as a way of diversifying a protfolio.
The fact you have physcical tangble assest of a finite resource in a country that is becoming more populated and wealthier always appears like a solid move (excuse the pun).
Price of land tends to track as a negative relationship to property and you can see clear spykes in land value during a recession which gradually reduces as the economy recovers. Given the potential for rocky economy ahead it could be an interesting time to invest.
A simple and crude example from Savills; https://www.savills.co.uk/research_articles/229130...
The fact you have physcical tangble assest of a finite resource in a country that is becoming more populated and wealthier always appears like a solid move (excuse the pun).
Price of land tends to track as a negative relationship to property and you can see clear spykes in land value during a recession which gradually reduces as the economy recovers. Given the potential for rocky economy ahead it could be an interesting time to invest.
A simple and crude example from Savills; https://www.savills.co.uk/research_articles/229130...
May I add something...?
It is simply not possible to know you have entered a recession until it has happened.
Sure, you can see signs, but how reliable are they to professionals, let alone the average person.
How many here are guilty of calling a recession a year ago (when markets have continued to rise)?
Unless you have a crystal ball then shove it away and don't think about it.
Markets are extremely efficient and most of what your fear is already priced in.
Buy and hold. It beats second guessing twice (once when you sell, then again when you but back).
It is simply not possible to know you have entered a recession until it has happened.
Sure, you can see signs, but how reliable are they to professionals, let alone the average person.
How many here are guilty of calling a recession a year ago (when markets have continued to rise)?
Unless you have a crystal ball then shove it away and don't think about it.
Markets are extremely efficient and most of what your fear is already priced in.
Buy and hold. It beats second guessing twice (once when you sell, then again when you but back).
btdk5 said:
DonkeyApple said:
digger_R said:
btdk5 said:
Have you thought about looking at structured products? Can be a good choice if you’re worried about volatility.
They won’t compound but they do give you a known or guaranteed bonus. You can get pretty defensive structures providing yields of 6-8% up to aggressive structures giving double digit returns.
would be very interested to hear more about this. They won’t compound but they do give you a known or guaranteed bonus. You can get pretty defensive structures providing yields of 6-8% up to aggressive structures giving double digit returns.
Some really valuable discussion here - I'm also in the camp that believes we are in a different economic paradigm with significantly more money being printed.
As someone who is not thinking over this day and night - I'm looking for a way to invest in a meaningful way for my long term future without losing too much sleep!
The first and most important question any retail investor should always ask themselves when an investment is put in front of them is this: ‘ Why is little, old, humble, unimportant me being offered this opportunity, how come no bank, fund, institutional or HNW individual has taken this or kept this for themselves?’
The answer beyond a sensible level of return that is defined by either the global stock market or global lending is that you are being offered an abnormally high level of return because you are considered to be a f
king idiot who’ll buy penny chews for a £1. With SPs you really need to focus on the small print that defines the investment criteria. In an ideal world what you want to be doing is locking in future stock market returns at a fixed rate and also in exchange for taking that fix receiving lower risk on your capital than if you just invested it yourself in the same markets to get the predicted higher returns but with the risk of not getting those high returns (if that makes sense as I’ve worded it a bit poorly). In reality, most SPs today don’t bother giving any credible downside protections (which you’re still paying for) because they don’t have to as customers have just been hurling billions into the offshore invisible bamboo market for much higher imaginary returns.
Structured products work perfectly well in flat or falling markets, so if your concern as the thread states is recessionary or falling markets they are worth looking at.
You’re lending your capital to the issuer of the product, say credit Suisse, what they do with it is not your concern. They will offer a defined bonus based on the performance of an underlying asset and partial capital protection. They do this by purchasing a zero coupon bond coupled with a call option.
Will you get any of the upside or dividend income of the underlying. No. But the reason you’re buying is because you don’t think the upside will be big.
Are they offered to HNW individuals - yes. the bank I work for invests £100ms annually for them. They are slightly sophisticated products though, which is maybe why most retail clients haven’t heard of them.
I think Investec offer them at £50k minimum investment, not sure where else offers that low.
JulianPH said:
It is simply not possible to know you have entered a recession until it has happened.
Buy and hold. It beats second guessing twice (once when you sell, then again when you but back).
^^ This. 20:20 hindsight isn't worth a row of beans. Everybody can be an expert after the event.Buy and hold. It beats second guessing twice (once when you sell, then again when you but back).
JulianPH said:
It is simply not possible to know you have entered a recession until it has happened.
Sure, you can see signs, but how reliable are they to professionals, let alone the average person.
How many here are guilty of calling a recession a year ago (when markets have continued to rise)?
Unless you have a crystal ball then shove it away and don't think about it.
Markets are extremely efficient and most of what your fear is already priced in.
Buy and hold. It beats second guessing twice (once when you sell, then again when you buy back).
Sure, you can see signs, but how reliable are they to professionals, let alone the average person.
How many here are guilty of calling a recession a year ago (when markets have continued to rise)?
Unless you have a crystal ball then shove it away and don't think about it.
Markets are extremely efficient and most of what your fear is already priced in.
Buy and hold. It beats second guessing twice (once when you sell, then again when you buy back).
We might have the feeling of a bubble, but can never anticipate exactly when it will burst.
In about 2006 we were witnessing;
Liar mortgages through brokers - choose any figure for your income and no one will check it.
125% loan to value mortgages. Spend the extra borrowing on whatever you like.
Panorama programmes secretly filming what was going on, but none of the financial monitoring bodies took any notice whatsoever.
It only became clear that the fun was finally over, one morning in September 2007. On Radio 4 Today programme, the CEO of Northern Rock (or was it Bradford and Bingley) described how they could not repay a debt by the required date, because it was impossible for them to refinance it.
After that it became a collapsing house of cards. The stock market suffered until March 2003.
It seems now that governments and many individuals are borrowing more than ever before. Surely this cannot go on indefinitely, but I dont know what is going to happen.
Certainly agree with you Julian, about buy and hold to remove guess work. If the overall portfolio dividend total, continues steadily upwards for 30 years, that must be one encouraging indicator that it does work.
rockin said:
JulianPH said:
It is simply not possible to know you have entered a recession until it has happened.
Buy and hold. It beats second guessing twice (once when you sell, then again when you but back).
^^ This. 20:20 hindsight isn't worth a row of beans. Everybody can be an expert after the event.Buy and hold. It beats second guessing twice (once when you sell, then again when you but back).
Jon39 said:
We might have the feeling of a bubble, but can never anticipate exactly when it will burst.
In about 2006 we were witnessing;
Liar mortgages through brokers - choose any figure for your income and no one will check it.
125% loan to value mortgages. Spend the extra borrowing on whatever you like.
Panorama programmes secretly filming what was going on, but none of the financial monitoring bodies took any notice whatsoever.
It only became clear that the fun was finally over, one morning in September 2007. On Radio 4 Today programme, the CEO of Northern Rock (or was it Bradford and Bingley) described how they could not repay a debt by the required date, because it was impossible for them to refinance it.
After that it became a collapsing house of cards. The stock market suffered until March 2003.
It seems now that governments and many individuals are borrowing more than ever before. Surely this cannot go on indefinitely, but I dont know what is going to happen.
Certainly agree with you Julian, about buy and hold to remove guess work. If the overall portfolio dividend total, continues steadily upwards for 30 years, that must be one encouraging indicator that it does work.
I certainly feel that something is looming again. My personal view is that Trump is kicking off a trade war as the US economy was growing too quickly and there are so many zombie companies in the 500 that rising interest rates was going to sink half the firms in the US so picking a fight with China allows them to curb rates and return to the printing presses. Somewhat tinfoil territory but we have more debt than last time and the only way to avoid total disaster is to devalue global currencies again.
My personal view re recession proofing is the same as above, keep saving and investing as we don’t know what is going to happen or when but we do know that it’s cyclical. But to add to that, I feel that the other vital thing to do is to make sure one’s foundations are shored up as ultimately, whatever happens the bad stuff, excluding pure bad luck, happens to those in the middle income zone who haven’t put enough aside to fair a storm.
I assume most people are buy and hold.
The challenge is with cash in the bank what to buy and hold today.
I've tended to put most of my invested money into safer/cautious mixed funds that have that lovely fuddy duddy title of "wealth preservation" but that have averaged pretty decent returns over the long run.
I'm crossing my fingers that continues.
The challenge is with cash in the bank what to buy and hold today.
I've tended to put most of my invested money into safer/cautious mixed funds that have that lovely fuddy duddy title of "wealth preservation" but that have averaged pretty decent returns over the long run.
I'm crossing my fingers that continues.
ka90 said:
I've always been brought back to land, in particular forest & farming land to-let, as a way of diversifying a protfolio.
The fact you have physcical tangble assest of a finite resource in a country that is becoming more populated and wealthier always appears like a solid move (excuse the pun).
Price of land tends to track as a negative relationship to property and you can see clear spykes in land value during a recession which gradually reduces as the economy recovers. Given the potential for rocky economy ahead it could be an interesting time to invest.
A simple and crude example from Savills; https://www.savills.co.uk/research_articles/229130...
Sorry to come back to this...The fact you have physcical tangble assest of a finite resource in a country that is becoming more populated and wealthier always appears like a solid move (excuse the pun).
Price of land tends to track as a negative relationship to property and you can see clear spykes in land value during a recession which gradually reduces as the economy recovers. Given the potential for rocky economy ahead it could be an interesting time to invest.
A simple and crude example from Savills; https://www.savills.co.uk/research_articles/229130...
But the funds invested in timber, land, and agriculture (ie the 3 things Savilles think have increased in value) have massively underperformed the stock market funds, whereas you would have expected them to outperform.
Can anyone explain why, because the cynical part of me says that Savilles, as a land agent, stand to benefit from people investing in land and timber....
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