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Turned market - what to do with cash ?


man o' the year
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man o' the year

I am about to have a problem that I had never throught tthat I would. I will soon, (when transfers go through), have close to £100k cash in a SIPP and a further £55k in various ISAs to decide where to invest. My problem is that my investment strategy does not seem suited to the recent turn in the market. I have previously done well but since mid February my wings have well and truly been clipped and my portfolio is insufficiently diverse to cope with this. I am keen on the diversity offered by funds. At the moment they are distributed as : 44% USA, 23% UK, 12% Japan, 10% Europe, 5% Asia and 5% China. This totals about £240k. There is a further £15k at the moment in the ISA but as cash and we have £100k in Premium Bonds.

We don't have enough yet to buy what we want but are saving towards an end goal of business and property purchase. Mortgage remaining on present property is about £90k at a mortgage rate of 1.75%. Clearly there are no bank savings accounts paying anything significant so question is what to do with the money. I am not interested in donating to other Dosbod retirement funds or holiday appeals but just wondering what others are doing. Nor am I interested in Bitcoin nor gold.

Perhaps I am spoiled by my previous success. I am still, despite recent falls, up about £70k up on ISA stocks and shares accumulated since 2017 and one year since then missed when I put nothing in. 

 

 

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Frank Hovis

 

@man o' the year I've been in the stock markets for so long now that I alwasy take the long view and don't mind the dips because they always recover and more.

My basic strategy, though I do have some fun stocks for interest, is to be in low fee trackers (fees can be 1.5% or more below those of managed funds which soon compounds up) in the big companies of developed economies with weighting upon economy and company size.

Historically developed economies have always substantially outperformed emergent / developing economies and big companies smaller ones.

 

If however you want an alternative to that then why not high dividend defensive stocks like oil (most of my "fun" stocks) or tobacco?

I think some gold a good idea because of its being both a hedge against inflation and something not means tested.  When care home fees raid the cupboards of your other investments leaving the shelves bare you will still have your gold under the squeaky board to give to your children.

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man o' the year
13 minutes ago, Frank Hovis said:

 

@man o' the year I've been in the stock markets for so long now that I alwasy take the long view and don't mind the dips because they always recover and more.

My basic strategy, though I do have some fun stocks for interest, is to be in low fee trackers (fees can be 1.5% or more below those of managed funds which soon compounds up) in the big companies of developed economies with weighting upon economy and company size.

Historically developed economies have always substantially outperformed emergent / developing economies and big companies smaller ones.

 

If however you want an alternative to that then why not high dividend defensive stocks like oil (most of my "fun" stocks) or tobacco?

I think some gold a good idea because of its being both a hedge against inflation and something not means tested.  When care home fees raid the cupboards of your other investments leaving the shelves bare you will still have your gold under the squeaky board to give to your children.

Thanks. I have started "playing" in a similar way with shares, biased towards high dividends. Happy to invest in oil but will not touch tobacco.

I am not worried about care home fees as pensions will likely cover all/most of those. 

It just feels as though suddenly things are very different and that the new norm may be more suited to a different strategy. The greater risk of putting still more money into the markets I am finding disconcerting in this perceived change of mood.

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Frank Hovis
7 minutes ago, man o' the year said:

Thanks. I have started "playing" in a similar way with shares, biased towards high dividends. Happy to invest in oil but will not touch tobacco.

I am not worried about care home fees as pensions will likely cover all/most of those. 

It just feels as though suddenly things are very different and that the new norm may be more suited to a different strategy. The greater risk of putting still more money into the markets I am finding disconcerting in this perceived change of mood.

 

I'm expecting a dip short term but think that loose money strategies will be continued indefinitely by all the major economies inevitably leading to higher sustained inflation which will serve to raise everything relative to cash.

Also the Covid lockdowns have been the death knell for many small operators which means that the big players have been gifted near-monopoly status.

Think of all the family-run pubs that have closed down never to re-open; that trade is going to go the big pub operators who had the bank facilities to ride it out. 

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Calcutta
4 hours ago, Frank Hovis said:

 

I'm expecting a dip short term but think that loose money strategies will be continued indefinitely by all the major economies inevitably leading to higher sustained inflation which will serve to raise everything relative to cash.

Also the Covid lockdowns have been the death knell for many small operators which means that the big players have been gifted near-monopoly status.

Think of all the family-run pubs that have closed down never to re-open; that trade is going to go the big pub operators who had the bank facilities to ride it out. 

All of this has happened and I have no idea how much wetherspoons shares are now....time to investigate. 

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Hancock
7 hours ago, man o' the year said:

Thanks. I have started "playing" in a similar way with shares, biased towards high dividends. Happy to invest in oil but will not touch tobacco.

I am not worried about care home fees as pensions will likely cover all/most of those. 

It just feels as though suddenly things are very different and that the new norm may be more suited to a different strategy. The greater risk of putting still more money into the markets I am finding disconcerting in this perceived change of mood.

If you're looking to buy a house with this 100k in the coming year or 2, isnt it worth just leaving it in cash.

Thats on the presumption we see some kind of correction.

For what its worth, I have a greater sum in cash than that as its going to be used for buying a house, in the next year or so.

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man o' the year
1 hour ago, Hancock said:

If you're looking to buy a house with this 100k in the coming year or 2, isnt it worth just leaving it in cash.

Thats on the presumption we see some kind of correction.

For what its worth, I have a greater sum in cash than that as its going to be used for buying a house, in the next year or so.

Yes of course that is a danger - investing and then there being a correction.

It just feels redundant and I am not now liking that redundancy. Where is yours at the moment? I am sure you feel at least minor frustration. 

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Hancock
17 minutes ago, man o' the year said:

Yes of course that is a danger - investing and then there being a correction.

It just feels redundant and I am not now liking that redundancy. Where is yours at the moment? I am sure you feel at least minor frustration. 

Mines in premium bonds and savings accounts getting sweet FA.

Got money in a SIPP that i use for punting on the markets. In any normal world house prices should have crashed when the entire economy was closed, but maybe it'll be when the govt cant print money any longer, or to the extent the have ... which has to be soon.

Issue with putting money into the markets for a couple of years is you may not get as much out if there is a correction. If it was for the long term i've no doubt you would, but playing the stock markets for a couple of year timeframe is in essence gambling.

But yes i'm fucken fuming at whats gone on and is going on, as all i want is a quiet life and to raise my kid with stability.

I'm starting to see the outrageously absurd prices getting reduced to slightly less absurd prices.

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man o' the year
37 minutes ago, Hancock said:

Mines in premium bonds and savings accounts getting sweet FA.

Got money in a SIPP that i use for punting on the markets. In any normal world house prices should have crashed when the entire economy was closed, but maybe it'll be when the govt cant print money any longer, or to the extent the have ... which has to be soon.

Issue with putting money into the markets for a couple of years is you may not get as much out if there is a correction. If it was for the long term i've no doubt you would, but playing the stock markets for a couple of year timeframe is in essence gambling.

But yes i'm fucken fuming at whats gone on and is going on, as all i want is a quiet life and to raise my kid with stability.

I'm starting to see the outrageously absurd prices getting reduced to slightly less absurd prices.

I sincerely wish all the best of luck. People like yourself deserve it.

I am at a different stage of life and to some extent am able to accept more risk. I am running out of time to do what I want and need more money to do that  and so some risk is needed to stand a chance of achieving it. In the long run it will make little difference as our income in the future (when my younger wife's pension starts and my own state pension starts) is locked in as much as it can be. Even short term if we sell where we are we are in a strong position to move forward.  In truth £350k would move us on but I could borrow that against our present property.

My investment strategy must adapt and I think I am starting to acquire some skills needed but still have no experience in this changed market.  

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Hancock
6 minutes ago, man o' the year said:

I sincerely wish all the best of luck. People like yourself deserve it.

I am at a different stage of life and to some extent am able to accept more risk. I am running out of time to do what I want and need more money to do that  and so some risk is needed to stand a chance of achieving it. In the long run it will make little difference as our income in the future (when my younger wife's pension starts and my own state pension starts) is locked in as much as it can be. Even short term if we sell where we are we are in a strong position to move forward.  In truth £350k would move us on but I could borrow that against our present property.

My investment strategy must adapt and I think I am starting to acquire some skills needed but still have no experience in this changed market.  

Its a pity Sunak extended SDLT as i think ending the holiday will see the start of the correction. Presumably so does Sunak hence why he extended it.

No matter what you decide these days its a gamble which is an absurd way to run a so called civilised society/economy.

 

 

 

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wherebee
3 hours ago, Hancock said:

Its a pity Sunak extended SDLT as i think ending the holiday will see the start of the correction. Presumably so does Sunak hence why he extended it.

No matter what you decide these days its a gamble which is an absurd way to run a so called civilised society/economy.

If you believe inflation is coming hard, buying the biggest house you can afford and a big tasty fixed mortgage is the rational call.  so prices may not fall.

If you you believe deflation is coming hard, not buying and waiting for the crash is the rational call.  So prices may fall in advance.

 

So it all depends on what other people think is coming.

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Frank Hovis
2 hours ago, wherebee said:

If you believe inflation is coming hard, buying the biggest house you can afford and a big tasty fixed mortgage is the rational call.  so prices may not fall.

If you you believe deflation is coming hard, not buying and waiting for the crash is the rational call.  So prices may fall in advance.

 

So it all depends on what other people think is coming.

Most people's default setting since about 2000 has been to buy the most expensive house for which they are able to obtain a mortgage.

It isn't a rational market and should not be treated as such.

House prices will only start to fall when the amount people can borrow through mortgage reduces; whether through higher deposits being required, lower earnings multiples advanced, or higher interest rates coming in.

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wherebee
56 minutes ago, Frank Hovis said:

Most people's default setting since about 2000 has been to buy the most expensive house for which they are able to obtain a mortgage.

It isn't a rational market and should not be treated as such.

House prices will only start to fall when the amount people can borrow through mortgage reduces; whether through higher deposits being required, lower earnings multiples advanced, or higher interest rates coming in.

but many got a variable rate, which is not what I am saying. That, now, would be madness whatever happens.

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Frank Hovis
1 minute ago, wherebee said:

but many got a variable rate, which is not what I am saying. That, now, would be madness whatever happens.

You can always fix later.

Rates are so low that you may be talking about one or two percent difference; not five.

It is so ingrained that you cannot lose with bricks and mortar and it is now thirty years since anyone did.  I read an Inspector Morse where it mentioned people trapped within starter homes that they couldn't sell owing to negative equity.

The sentiment that house prices only ever go up is bone deep within 90%+ of the UK population.  That isn't going to change until circumstances do, house prices are tumbling, and negative equity becomes an everyday phrase again.

All rational analysis says that house prices at their current levels are unsustainable, most people could not afford to buy at today's prices the house that they own, and must see material falls at some point.

That is however only going to happen when economic reality forces it to happen and not through a nation suddenly realising that house prices are at stupid levels because they will never realise that.

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Hancock
5 hours ago, wherebee said:

If you believe inflation is coming hard, buying the biggest house you can afford and a big tasty fixed mortgage is the rational call.  so prices may not fall.

If i was 22, wanted to work like a slave and take on a load of debt. I dont fall into these brackets.

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goldbug9999

The problem that many here have (as did I until not so  long ago) is that you are using your earned money to compete with people who have been gifted vast amounts via HPI on their existing house. To these people a half million pound shithole will be a "bargain" because their current shithole has generated all that magic money for them.

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Frank Hovis
46 minutes ago, goldbug9999 said:

The problem that many here have (as did I until not so  long ago) is that you are using your earned money to compete with people who have been gifted vast amounts via HPI on their existing house. To these people a half million pound shithole will be a "bargain" because their current shithole has generated all that magic money for them.

 

Yes, I was saying about the division between the lower market, houses bought from earnings, and the upper market, houses bought from previous HPI, and the yawning gap between them.

Whilst I didn't buy mine from HPI, and am an exception in that, I happened to see what similar houses have been going for the other day and find I'm in the upper market.  I won't quote figures as it's vulgar but it's a small family house in a nice quiet location.  I like it but it's nothing special and really shouldn't be in the upper market; and wasn't when I bought it. I don't actually like that it's gone up because I want somewhere bigger and that has become proportionately more expensive. I want a crash for purely selfish reasons.

The granddaughter of a family friend and her partner have a £200k budget (mortgage and deposit) to buy somewhere nice with the intention of living in it during the winter and renting it out during the summer to supplement their income.  They have been living on the continent in a van but each runs a business; nothing spectacular but enough to pay the bills and raise a deposit.

In one sense that's a great plan but the timing is wrong because the market, especially down here in Cornwall, has gone nuts.  £200k will no longer buy somewhere nice enough by the sea that you could rent it out in the summer.

And that's in a county with average wages of £26k so to be able to raise sufficient to have a budget of £200k is itself impressive.

So what do they do?  I don't know.  They could buy somehwere inland and post-industrial like Camborne, Redruth or Bodmin but then wouldn't have anyone wanting to rent it for the summer so the plan fails.  Or they could keep struggling on and raise that £200k budget to £250k but by the time they've done that prices will have hoiked again.

If we get a crash then they're fine but the government seems determined to do anything to stop that happening and that's creating a generation of successful hardworking people who cannot buy a house.

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goldbug9999

Amen @Frank Hovis Currently telling my step son that hes got become a programmer or hes fucked, if you earn top 5% salary you will be able to scrape the living that a bin man could 30 years ago and consider yourself one of the lucky ones. Welcome to modern Britain.

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Hancock
1 hour ago, goldbug9999 said:

The problem that many here have (as did I until not so  long ago) is that you are using your earned money to compete with people who have been gifted vast amounts via HPI on their existing house. To these people a half million pound shithole will be a "bargain" because their current shithole has generated all that magic money for them.

Its the competing against a govt intent on doing all it can to avoid a crash that is the main issue.

But with SDLT extension and the new 5% mortgage scam the only cards left on the table, with mass unemployment when furlough ends about to happen, then it does seem a correction of sorts is a reasonable thing to predict.

 

 

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