Where to invest?
Discussion
I got slightly burnt in the markets last week. I had about a 9% loss on initial investment and bailed out to stop the bleeding. This is already looking like a mistake but time will tell.
I thought I was being sensible with 60/40 global trackers and some defensive stocks for income but I feel that even this is above my risk tolerance when there is so much potential doom and gloom around.
I’m not really sure where to turn now.
1% in cash savings?
Go back into the markets with even more weighting towards bonds?
BTL?
Small business?
I never wanted the hassle factor of BTL but it feels like a pretty steady 4-5% yield. This would more than meet my financial needs.
What are you guys thinking to get a return and also sleep soundly at night?
I thought I was being sensible with 60/40 global trackers and some defensive stocks for income but I feel that even this is above my risk tolerance when there is so much potential doom and gloom around.
I’m not really sure where to turn now.
1% in cash savings?
Go back into the markets with even more weighting towards bonds?
BTL?
Small business?
I never wanted the hassle factor of BTL but it feels like a pretty steady 4-5% yield. This would more than meet my financial needs.
What are you guys thinking to get a return and also sleep soundly at night?
Edited by dmahon on Tuesday 3rd March 10:24
dmahon said:
What are you guys thinking to get a return and also sleep soundly at night?
This may sound flippant but if you are investing for the long term, check your portfolio less frequently!Otherwise you will make the classic retail investor mistakes of selling low and buying high.
Worth remembering that dividend-focused FTSE funds will also yield 4-5% (but you sacrifice growth for the stability).
The value of a BTL property also moves around, it's just that you don't have to think about it as much (because it's much harder & costlier to buy, value & sell).
i do get that but I was seeing £50k+ loss per day and there’s still a good case to be made that this isn’t the bottom. It’s very tricky to stay the course even if you are in for the long term.
Something like this makes me take a step back and think about long term goals and the most appropriate investment.
Something like this makes me take a step back and think about long term goals and the most appropriate investment.
NickCQ said:
dmahon said:
What are you guys thinking to get a return and also sleep soundly at night?
This may sound flippant but if you are investing for the long term, check your portfolio less frequently!Otherwise you will make the classic retail investor mistakes of selling low and buying high.
Worth remembering that dividend-focused FTSE funds will also yield 4-5% (but you sacrifice growth for the stability).
The value of a BTL property also moves around, it's just that you don't have to think about it as much (because it's much harder & costlier to buy, value & sell).
dmahon said:
i do get that but I was seeing £50k+ loss per day and there’s still a good case to be made that this isn’t the bottom. It’s very tricky to stay the course even if you are in for the long term.
Something like this makes me take a step back and think about long term goals and the most appropriate investment.
If your vol was £50k+ you either have a chunky portfolio or a lot of leverage Something like this makes me take a step back and think about long term goals and the most appropriate investment.
At that sort of scale you can do meaningful diversification so £100-200k or so in low-hassle managed BTL wouldn't be a bad idea.
dmahon said:
i do get that but I was seeing £50k+ loss per day and there’s still a good case to be made that this isn’t the bottom. It’s very tricky to stay the course even if you are in for the long term.
Quite a portfolio there!! If you are in for the long term just don't check it's easy. I've bailed. But then I need a chunk of money over the next 10 weeks.
If thinks were to get much worse over this flu epidemic, you can certainly expect to see the markets dip further & see an impact on house prices.
dmahon said:
NickCQ said:
dmahon said:
What are you guys thinking to get a return and also sleep soundly at night?
This may sound flippant but if you are investing for the long term, check your portfolio less frequently!Otherwise you will make the classic retail investor mistakes of selling low and buying high.
Worth remembering that dividend-focused FTSE funds will also yield 4-5% (but you sacrifice growth for the stability).
The value of a BTL property also moves around, it's just that you don't have to think about it as much (because it's much harder & costlier to buy, value & sell).
It provides a good return but also is quite time-consuming, even with a managing agent.
I wouldn't rule out investing back into stocks/shares etc as part of a diversified portfolio but the student accommodation I've invested in is fully let till September 2021 so I am pretty happy at the moment.
Happy to give you some pointers if you like.
Dan
It is the size of the portfolio that is hard to deal with. 10% isnt a big swing but it’s a painful amount of money!
I do look at the markets and see so many unknowns, a lot of risk, and like the poster above I don’t really understand what moves them. And when you bounce from recessions you trade wars to global pandemics the waters feel quite choppy.
If I do re enter the markets, it sounds ridiculous but checking once a year probably is the only strategy that will work.
The problem I have is is that property seems the next best option but one which also has big downsides. Entry and exit costs, illiquidity, bad tenants, changing tax environment etc. By the time you add in all of the fees and account for voids, the returns aren’t amazing.
I thought I was diversifying with a global tracker, but all markets seem correlated. It might be that diversifying some into property is the way forward.
I do look at the markets and see so many unknowns, a lot of risk, and like the poster above I don’t really understand what moves them. And when you bounce from recessions you trade wars to global pandemics the waters feel quite choppy.
If I do re enter the markets, it sounds ridiculous but checking once a year probably is the only strategy that will work.
The problem I have is is that property seems the next best option but one which also has big downsides. Entry and exit costs, illiquidity, bad tenants, changing tax environment etc. By the time you add in all of the fees and account for voids, the returns aren’t amazing.
I thought I was diversifying with a global tracker, but all markets seem correlated. It might be that diversifying some into property is the way forward.
I'll give you an idea of the last property I invested in.
Purchase Price - £600,000
Refurb Cost - £673,000
Architect/Legal/Planning/Stamp etc.. - £143,000
Valuation on completion - £2,400,000
Refinanced on 75% ltv - £1,800,000
Net Income after refinance - £74,500
It was a 2 year process to get to completion but mitigated a large amount of the risk by STP purchase and good builders.
Purchase Price - £600,000
Refurb Cost - £673,000
Architect/Legal/Planning/Stamp etc.. - £143,000
Valuation on completion - £2,400,000
Refinanced on 75% ltv - £1,800,000
Net Income after refinance - £74,500
It was a 2 year process to get to completion but mitigated a large amount of the risk by STP purchase and good builders.
NickCQ said:
dmahon said:
i do get that but I was seeing £50k+ loss per day and there’s still a good case to be made that this isn’t the bottom. It’s very tricky to stay the course even if you are in for the long term.
Something like this makes me take a step back and think about long term goals and the most appropriate investment.
If your vol was £50k+ you either have a chunky portfolio or a lot of leverage Something like this makes me take a step back and think about long term goals and the most appropriate investment.
At that sort of scale you can do meaningful diversification so £100-200k or so in low-hassle managed BTL wouldn't be a bad idea.
Never mind moving to BTL, etc.....your pot alone would meet my financial needs, in a 0.1% interest bank account
dmahon said:
It is the size of the portfolio that is hard to deal with. 10% isn't a big swing but it’s a painful amount of money!
I do look at the markets and see so many unknowns, a lot of risk, and like the poster above I don’t really understand what moves them. And when you bounce from recessions you trade wars to global pandemics the waters feel quite choppy.
If I do re enter the markets, it sounds ridiculous but checking once a year probably is the only strategy that will work.
The problem I have is is that property seems the next best option but one which also has big downsides. Entry and exit costs, illiquidity, bad tenants, changing tax environment etc. By the time you add in all of the fees and account for voids, the returns aren’t amazing.
I thought I was diversifying with a global tracker, but all markets seem correlated. It might be that diversifying some into property is the way forward.
Have you not noticed how your massive portfolio perhaps *cough* GREW by 10% since perhaps last Oct/Nov/Dec?I do look at the markets and see so many unknowns, a lot of risk, and like the poster above I don’t really understand what moves them. And when you bounce from recessions you trade wars to global pandemics the waters feel quite choppy.
If I do re enter the markets, it sounds ridiculous but checking once a year probably is the only strategy that will work.
The problem I have is is that property seems the next best option but one which also has big downsides. Entry and exit costs, illiquidity, bad tenants, changing tax environment etc. By the time you add in all of the fees and account for voids, the returns aren’t amazing.
I thought I was diversifying with a global tracker, but all markets seem correlated. It might be that diversifying some into property is the way forward.
With that size of portfolio (all in a global tracker?) - are you managing it yourself? (it sounds like it).
If so, why would you be spooked by a 10% drop?
I don't understand this kind of leaping out at the first sign of a market correction. I know it is human nature to find it....discombobulating.....
The GROWTH over the past few years pretty well mandated that there be this sort of thing.
Worrying about 'doom and gloom' appears to me to be very peculiar for someone with such a large pot - I could understand it with someone with a sub-£100k pot (even thought it equally makes no sense!).
Diversify if you want....
Markets move up, they move down.....if you think it is the end of the world, buy tins & bottled water!
mikeiow said:
Have you not noticed how your massive portfolio perhaps *cough* GREW by 10% since perhaps last Oct/Nov/Dec?
With that size of portfolio (all in a global tracker?) - are you managing it yourself? (it sounds like it).
If so, why would you be spooked by a 10% drop?
I don't understand this kind of leaping out at the first sign of a market correction. I know it is human nature to find it....discombobulating.....
The GROWTH over the past few years pretty well mandated that there be this sort of thing.
Worrying about 'doom and gloom' appears to me to be very peculiar for someone with such a large pot - I could understand it with someone with a sub-£100k pot (even thought it equally makes no sense!).
Diversify if you want....
Markets move up, they move down.....if you think it is the end of the world, buy tins & bottled water!
For some sequence risk is a big concern & I don't see anyone saying the Coronavirus issue is anywhere near peaking except maybe in China & the numbers coming from there are hardly reliable. There's a long way to go yet. With that size of portfolio (all in a global tracker?) - are you managing it yourself? (it sounds like it).
If so, why would you be spooked by a 10% drop?
I don't understand this kind of leaping out at the first sign of a market correction. I know it is human nature to find it....discombobulating.....
The GROWTH over the past few years pretty well mandated that there be this sort of thing.
Worrying about 'doom and gloom' appears to me to be very peculiar for someone with such a large pot - I could understand it with someone with a sub-£100k pot (even thought it equally makes no sense!).
Diversify if you want....
Markets move up, they move down.....if you think it is the end of the world, buy tins & bottled water!
Mr Pointy said:
For some sequence risk is a big concern & I don't see anyone saying the Coronavirus issue is anywhere near peaking except maybe in China & the numbers coming from there are hardly reliable. There's a long way to go yet.
I'm one of those for whom it is a big risk.....& you may be right. @OP - sorry if my response sounded harsh (it read it when I re-read it just now) - I've skimmed some of your other posts.
If I were you I would sit down, pop a note on the IM sticky thread and have a chat with Nik at IM. It reads like you have relatively "suddenly" found yourself managing a large pot, and you would benefit from some guidance. No need to jump in to take on an IFA/Wealth Manager - start there!
(& I'd perhaps add more, but you don't appear to have email messaging on, so I won't here!)
mikeiow said:
Mr Pointy said:
For some sequence risk is a big concern & I don't see anyone saying the Coronavirus issue is anywhere near peaking except maybe in China & the numbers coming from there are hardly reliable. There's a long way to go yet.
I'm one of those for whom it is a big risk.....& you may be right. @OP - sorry if my response sounded harsh (it read it when I re-read it just now) - I've skimmed some of your other posts.
If I were you I would sit down, pop a note on the IM sticky thread and have a chat with Nik at IM. It reads like you have relatively "suddenly" found yourself managing a large pot, and you would benefit from some guidance. No need to jump in to take on an IFA/Wealth Manager - start there!
(& I'd perhaps add more, but you don't appear to have email messaging on, so I won't here!)
I'd agree about the OP contacting Nik though.
My problem is I invested from October onwards so didnt get much of the upside. Maybe I should have cost averaged over a year or so but too late now.
I did do the rounds of various IFAs and wealth advisors. In the end, I strongly bought into the Vanguard philosophy of "buy the world" with low fees so went down that route, thinking global diversification would keep me from the worst of the volatility. The problem here was that everything moved in the same direction.
My question really is where to go from here which allows some growth, minimises risk and allows me to sleep at night?
- Maybe the Vanguard philosophy is a good one and I should just buy back in on the next drop and try to stay calm;
- BTL looks like it smashes the number I need if I can take the hassle factor;
- Maybe I put it in Barclays savings bonds and accept 1% interest for a while;
It is a multi-million pot but I am young with high expenses and no plans to work for a while. If I run the numbers (living costs, inflation, returns), 1% returns would probably see me through. 2% would be comfortable, 3%+ would be happy days. Maybe I just shouldn't take any risk?
I did do the rounds of various IFAs and wealth advisors. In the end, I strongly bought into the Vanguard philosophy of "buy the world" with low fees so went down that route, thinking global diversification would keep me from the worst of the volatility. The problem here was that everything moved in the same direction.
My question really is where to go from here which allows some growth, minimises risk and allows me to sleep at night?
- Maybe the Vanguard philosophy is a good one and I should just buy back in on the next drop and try to stay calm;
- BTL looks like it smashes the number I need if I can take the hassle factor;
- Maybe I put it in Barclays savings bonds and accept 1% interest for a while;
It is a multi-million pot but I am young with high expenses and no plans to work for a while. If I run the numbers (living costs, inflation, returns), 1% returns would probably see me through. 2% would be comfortable, 3%+ would be happy days. Maybe I just shouldn't take any risk?
Thanks Mike and Mr Pointy for the mention.
OP - If you are not looking for high risk/reward returns do feel free to have a chat with Nik on the IM sticky at the top of the finance thread.
For example, IM Optimum Defensive has given an average annual return of over 5% a year for the last 10 years, yet is only down 0.8% since markets fell.
It is also fully managed so does not carry the hassle of a BTL or small business.
It might well be that it is your current investment approach which is wrong for you, rather than investing in itself.
OP - If you are not looking for high risk/reward returns do feel free to have a chat with Nik on the IM sticky at the top of the finance thread.
For example, IM Optimum Defensive has given an average annual return of over 5% a year for the last 10 years, yet is only down 0.8% since markets fell.
It is also fully managed so does not carry the hassle of a BTL or small business.
It might well be that it is your current investment approach which is wrong for you, rather than investing in itself.
dmahon said:
I got slightly burnt in the markets last week. I had about a 9% loss on initial investment and bailed out to stop the bleeding. This is already looking like a mistake but time will tell.
I thought I was being sensible with 60/40 global trackers and some defensive stocks for income but I feel that even this is above my risk tolerance when there is so much potential doom and gloom around.
I’m not really sure where to turn now.
1% in cash savings?
Go back into the markets with even more weighting towards bonds?
BTL?
Small business?
I never wanted the hassle factor of BTL but it feels like a pretty steady 4-5% yield. This would more than meet my financial needs.
What are you guys thinking to get a return and also sleep soundly at night?
A few observations. You mentioned 60/40 but it's not clear what the 40% constituent is to get such big falls - for example Lifestrategy 60% equity doesn't show thatI thought I was being sensible with 60/40 global trackers and some defensive stocks for income but I feel that even this is above my risk tolerance when there is so much potential doom and gloom around.
I’m not really sure where to turn now.
1% in cash savings?
Go back into the markets with even more weighting towards bonds?
BTL?
Small business?
I never wanted the hassle factor of BTL but it feels like a pretty steady 4-5% yield. This would more than meet my financial needs.
What are you guys thinking to get a return and also sleep soundly at night?
Edited by dmahon on Tuesday 3rd March 10:24
https://www.hl.co.uk/funds/fund-discounts,-prices-...
I think you need to be very clear on why you are buying "defensive" stocks and what it gives you over holding 1000s of bonds/equities in a fund. You are taking on concentration risk that you might not be rewarded for.
Taking on more bond exposure might limit the downside but it doesn't eliminate it - double digit annual falls are not unheard of.
It might be worth understanding how much return (is the 4 to 5% fixed for the rest of your life and do you need a pot of money to pass down) you need to obtain to satisfy your objectives and this will determine how much market volatility you need to take. If you aren't happy with this volatility you may have to adjust your expectations.
dmahon said:
It is the size of the portfolio that is hard to deal with. 10% isnt a big swing but it’s a painful amount of money!
I do look at the markets and see so many unknowns, a lot of risk, and like the poster above I don’t really understand what moves them. And when you bounce from recessions you trade wars to global pandemics the waters feel quite choppy.
If I do re enter the markets, it sounds ridiculous but checking once a year probably is the only strategy that will work.
The problem I have is is that property seems the next best option but one which also has big downsides. Entry and exit costs, illiquidity, bad tenants, changing tax environment etc. By the time you add in all of the fees and account for voids, the returns aren’t amazing.
I thought I was diversifying with a global tracker, but all markets seem correlated. It might be that diversifying some into property is the way forward.
You mention that all markets are correlated but some bonds funds rose over the period. For example.I do look at the markets and see so many unknowns, a lot of risk, and like the poster above I don’t really understand what moves them. And when you bounce from recessions you trade wars to global pandemics the waters feel quite choppy.
If I do re enter the markets, it sounds ridiculous but checking once a year probably is the only strategy that will work.
The problem I have is is that property seems the next best option but one which also has big downsides. Entry and exit costs, illiquidity, bad tenants, changing tax environment etc. By the time you add in all of the fees and account for voids, the returns aren’t amazing.
I thought I was diversifying with a global tracker, but all markets seem correlated. It might be that diversifying some into property is the way forward.
https://www.hl.co.uk/funds/fund-discounts,-prices-...
There's always a reason not to invest in the market. US biased but you get the point
https://www.hl.co.uk/funds/fund-discounts,-prices-...
dmahon said:
My problem is I invested from October onwards so didnt get much of the upside. Maybe I should have cost averaged over a year or so but too late now.
I did do the rounds of various IFAs and wealth advisors. In the end, I strongly bought into the Vanguard philosophy of "buy the world" with low fees so went down that route, thinking global diversification would keep me from the worst of the volatility. The problem here was that everything moved in the same direction.
My question really is where to go from here which allows some growth, minimises risk and allows me to sleep at night?
- Maybe the Vanguard philosophy is a good one and I should just buy back in on the next drop and try to stay calm;
- BTL looks like it smashes the number I need if I can take the hassle factor;
- Maybe I put it in Barclays savings bonds and accept 1% interest for a while;
It is a multi-million pot but I am young with high expenses and no plans to work for a while. If I run the numbers (living costs, inflation, returns), 1% returns would probably see me through. 2% would be comfortable, 3%+ would be happy days. Maybe I just shouldn't take any risk?
Plenty of financial advisers use Vanguard (and other similar products) in their portfolios - an increasing number as investment management is becoming commoditised. I did do the rounds of various IFAs and wealth advisors. In the end, I strongly bought into the Vanguard philosophy of "buy the world" with low fees so went down that route, thinking global diversification would keep me from the worst of the volatility. The problem here was that everything moved in the same direction.
My question really is where to go from here which allows some growth, minimises risk and allows me to sleep at night?
- Maybe the Vanguard philosophy is a good one and I should just buy back in on the next drop and try to stay calm;
- BTL looks like it smashes the number I need if I can take the hassle factor;
- Maybe I put it in Barclays savings bonds and accept 1% interest for a while;
It is a multi-million pot but I am young with high expenses and no plans to work for a while. If I run the numbers (living costs, inflation, returns), 1% returns would probably see me through. 2% would be comfortable, 3%+ would be happy days. Maybe I just shouldn't take any risk?
As mentioned there really isn't a way to separate risk and returns - unfortunately there's no free lunch.
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