towards a long term investing strategy

One of the disadvantages of saving money in a shortish time to retire early is you get a whole lump to manage at once. ISAs are designed for people who save in a civilised and steady way, not in a mad rush to get out of the workforce before the edifice falls around their ears. SG and TNT are great examples of how to do that task right, well done those guys!

I have saved a six-figure sum in pension AVCs, up to the absolute limit that I can save (25% of the total FS fund value) before being forced into an annuity for which I am too young.   All the AVCs have to be converted to cash, which has already happened, then tax-unwrapped as a tax-free wodge of cash on leaving work.

The tax system identifies people with lump sums as rich bastards ripe for the picking so it’ll take me over 10 years to get the equity part into ISAs. I’ve made a hash of the post-work tax planning. For technical reasons I will have to draw my pension, actuarially reduced because it’s early, but still over the putative £10k basic rate tax threshold for 2015. So I need a long-term investing strategy, to give me an income for the next 40 years. Preferably one that doesn’t add to my tax burden.

Pensions are designed to avoid investing a lump sum all at once – either you get a defined benefit, like mine, or you have restrictions placed on how you draw down your pension or have to take an annuity. That is to avoid retirees blowing the lump sum on as frenzy of cruises and fast cars, resulting in penury afterwards. The most common question I’m asked when people hear I’m leaving with a payoff is ‘what am I going to spend it on?’ It’s a strange way of thinking. I’d rather give the lump sum a chance to earn some money before running it down ;)

There’ll be some people that will need to invest a lump sum like me, so this post might be of some interest in showing the thought process. It’s not advice – I might screw things up, and my risk tolerance and background are unusual in some ways.

A strategic overview

Initially, my pension is easily enough for my running costs plus a reasonable entertainment budget. It is to some extent RPI linked, but I will slowly lose the fight to inflation as the decades roll by. Inflation contains a lot of consumer frippery and iFads that I don’t consume, but which generally come down in price due to technological advances. Needs and services tend to go up over time. If I buy less of the stuff that is getting cheaper relative to the stuff that is getting dearer then overall I will experience > RPI inflation.

I started work in February 1982, without any long-term vision or strategy of life. You can get away with that at 21 because you have fifty-odd years of life remaining (as it was at that time, current 21-year-olds will be happy to know they are up for nearly sixty years from now).

It looks like I have picked up a decade of life expectancy in the intervening 30 years, I’m not sure why. I’m up for another thirty years according to the ONS. So I probably stand pretty much midway through my adult life. If I look at my family history I might be wise to think in terms of income for 40 years, rather too much than too little…

Let’s just get up in the crow’s nest and look out for icebergs in the seas ahead. What’s likely to happen in the next 40 years?

Relative decline of the UK (short, med, long term)

I expect the UK to fall down the pecking order over the coming decades, largely due to our decadence and nasty tendency to live beyond our means, combined with the rotten state of the education system because we don’t dare discriminate between the bright and the dim bulbs in case it hurts the dim bulbs’ feelings. We may turn this around – there is probably enough nascent dynamism in the country and the British have a decent track record of resilience in the face of adversity, but the low-water mark is still some way off IMO.

A relative decline doesn’t necessarily mean an absolute decline. Living standards in the UK have fallen in the last couple of years, but compared to the 1960’s London I was born into, we enjoy a fantastic standard of living. The problem is that humans are relative – people felt better about their lives in the 1960s than they do at the moment, because they felt things were looking up.

economic storms across Europe (short, med term)

Large swathes of Europe are not just bankrupt but seem hell-bent on becoming destitute. In the immediate future there’s an extremely high risk of a godawful crash as the Eurozone goes titsup and an awful lot of what used to considered wealth simply evaporates because it isn’t backed by anything. That’s the cheerful interpretation, for the Mad Max scenario look no further than George Soros in the FT, who opines

Far from abating, the euro crisis has recently taken a turn for the worse. The European Central Bank relieved an incipient credit crunch through its longer-term refinancing operations. The resulting rally in financial markets hid an underlying deterioration; but that is unlikely to last much longer.

The fundamental problems have not been resolved; indeed, the gap between creditor and debtor countries continues to widen. The crisis has entered what may be a less volatile but more lethal phase.

There are opportunities there. That explosion will probably trash share prices across the region, possibly the world. The brave and the reckless, who are prepared to fly into the storm rather than trying to run before it, may find value is cheap as they pick over the wreckage. The successful must have internal reference points. When the falcon cannot hear the falconer and the centre loses hold there will be no external references to steer by.

Will I hold my head when all around are losing theirs? Buggered if I know. I’ve seen three recessions up close and personal and was a teenager in the 1970s oil crisis and stagflation. I was a heavy investor in 2009 after appreciating the logic behind this, indeed looking at my AVC contributions I stole a march on the article by a couple of weeks, but it did stiffen the spine. However, desperation concentrates the mind, and a 40% tax-free discount makes courage easier. Even a dog can be a great investor with a 40% leg-up.

a multipolar world (med, long term)

The power centres of the world economy are shifting, and it’s not really possible to say where they are shifting to. America is bankrupt but has the advantage of being the money creator of last resort, China is an enigma within a conundrum, they seem to be top dog at the moment but it is questionable if they will get rich before they grow old. India seems well-placed, though it could do with reining in the backhanders. Russia, well, do you feel lucky, punk?

It’s pretty unclear where the engine of growth will be in the decades to come, or if there will be one. We will have resource wars, beginning with oil wars. We’ve already had a few, Iraq and Libya spring to mind, Iran is on the hit list. As for that growth, perhaps Uncle Sam will dust himself down, spit on his hands and show everyone how it’s done. Maybe Africa will do something with all that Chinese money and a few of the rotten ageing dictators will get bumped off and the economies soar. Perhaps Peak Oil will come along and the entire economic system must fall until some of us work out whether trade still has any meaning in a energy-starved world. Who knows?

Go East young man – diversify

There’s only one way to handle that lack of knowledge – bet on several outcomes! Diversification comes in to flavours, coarse high level asset class diversification and fine level equity diversification, equities being a subset of the asset classes. I have now lost all equity geographical diversification from the UK, which I had emphasised in the AVC holdings.

Monevator has a listing of asset allocation strategies in his Lazy Portfolios Make Asset Allocation Easy post. That illuminated my thinking greatly, though I was initially confused as hell because all but the Harry Browne portfolio as asset allocation strategies as it said on the tin, but the Harry Browne one is in fact a asset class allocation strategy with a 1970’s era equity allocation.

Let’s take a run through them (the original 2009 post is more explanatory though TA’s later update is more actionable)

1. Allan Roth. Nope. I may be reckless, brave, even mad, but I’m not young.

2. David Swensen. I’m not an Ivy League endowment fund with a 100-years plus investment horizon. Not unless we go through the Kurzweil singularity and I don’t know about you but I’m not sure I want to live for ever in a world of beings increasingly smarter than me.

3. Rick Ferri’s Core Four

Too much developed world for my liking. I think the developed world is likely to become a lot less developed over the next 10-20 years. So it doesn’t meet with my world-view. Rick Ferri may well be right, but heck, it’s my life so it has to go along with my beliefs, even if I turn out to be wrong and this sort of thing happens.

4. Bill Schultheis Now we’re getting somewhere, the spread is similar to my mind to Tim Hale’s which I preferred but this is the first one I’d be happy with in terms of equity asset spread (I lop out bonds and gilts from every spread because of my specific circumstances of having significant fixed pension income)

5. Harry Browne’s Permanent Portfolio. Fascinating geezer, Harry Browne, with his seminal How I found Freedom in an Unfree World. He’s somewhere to the right of Ayn Rand who looks like a pinko Communist in comparison so it’s kind of disturbing that his was the one that really resonated with my world-view. It matches my expectation that there are serious challenges ahead, his choice of four orthogonal asset classes is what I like. His domestic-only equity target is very much of his 197os world where the developed world ruled, so it needs adapting to the modern world. It’s more an asset class allocation strategy.

6. Six Ways from Sunday. I just didn’t get this, so no dice. I actually share Scott Burns’ viewpoint that energy is the ultimate currency, so I did pinch one ETF idea from him.

7. William Bernstein’s No Brainer. Same issues to my eyes as Rick Ferri’s portfolio, too much developed world IMO.

8. Harry Markowitz. Attractive simplicity. I don’t do bonds because of my special circumstances (a FS pension that is pretty close to bonds in characteristics of fixed and index-linked  income). I probably want to weight more than the World ETF, but if I had a DC pension sum to invest this has a lot to be said for it., Being a fiddler, I’d weight to the UK (because that’s where I am) and after that underweight the developed world (because of my world-view). Thereby buggering up the simplicity, so not right for me and my resources.

9. Tim Hale – much to like here, though again I’d lop out the government bonds and index-linked gilts due to my specific circumstances. And translate the Vanguard funds into something I can access in an ISA without paying the earth. The bonds and gilts I’ve eliminated  is 40% of the portfolio, but the capital value of my FS pension is a lot more than the free capital I am investing, so taking a high-level view I am overweight fixed income.  I may get his book from the library to catch up with his thinking. I will use the equity distribution to illuminate my equities later.

Asset Class spread

Asset class diversification gets you out of the stock market in periods of irrational exuberance like 1999. And into it in times like 2009 when the world is caving in, and only Warren Buffet stands between the shattered wreckage of Wall Street and the Four Horsemen thundering in from all points.

As far as asset class diversification, I am drawn to Harry Browne’s Permanent Portfolio, which is roughly

25% stocks in the country you live in, 25% bonds, 25% cash and 25% gold

But since I’m an inveterate fiddler, and prepared to accept the consequences, I will consider this as

  • 25% equity portfolio
  • 25% bonds I shall consider my final-salary pension
  • 25% cash I will hold as NS&I ILSCs (I don’t know what a money market fund is, this seems to be US-specific)
  • 25% gold I will consider as including my non-financial investments.

I don’t know what Harry Browne was thinking of doing with his gold, but if he considered it his SHTF Bug-out stash I wonder if he considered the weight of it, he was a lot richer than I am and it was cheaper in his time.  I wouldn’t want to run with it, particularly with in the form of coins. I may add some in the form of an ETF, but I’m happy to think about that later. My non-financial investments also fall into a similar role in that they gain as the financial system falls, but they don’t have the portability or divisibility of gold.

We should also remember that Harry Browne lived in a country where householders are encouraged to keep a shotgun handy and are entitled to take down intruders within the curtilage of their property. In Europe we are somewhat namby-pamby and effete for such gung-ho defence of one’s chattels,  so holding physical gold is a lot less attractive for me than for Harry Browne.

Now the majority of my free cash savings come from pension AVC savings, and by the time I leave I will have driven this all the way to the 25% tax-free pension commencement lump sum limit. Given that the pension itself is in the fixed interest part, I’ll never balance that at 1/4, it will always be bigger.

this is not a canonical Harry Browne asset class spread but I start from where I am

Well, always bigger until this prediction comes to pass and the shares section eats the lot like Pac-man. Rebalancing keeps the right-hand-side in relative proportion but the whole would squeeze down the pension section :) The reason the fixed interest isn’t 3/4 of the pie is because I have existing savings  and the non-financial assets are substantial. And no, I still don’t include my house as part of my net worth because I have to live somewhere.

It’s obviously not pure Harry Browne because the cash and non-financial investments put together are about the same as the shares, which reflects my prejudices. I’m easy with that. I understand Harry Browne’s rationale and if I were working up from scratch over a working life I’d stick to his equal split. But I’m not, so I am going to do it my way, and take the hit for being an opinionated git if necessary.

The equity part of the Harry Browne portfolio, updated with Tim Hale

So I’ll take the equity portfolio, retain my HYP which is largely UK based, and already includes Aberforth for UK smallcap, turning it into a bastardized Hale variant like so:

  • 20% HYP (for the UK part)
  • 5% Aberforth Smaller Companies
  • 20% s Dev World ex-UK Equity, consisting of four HSBC funds as used in the slow and steady portfolio. Asia Pac seems to be developed world in investing terms.
  • 16% some sort of Global Emerging Markets LGAAAK seems to fit.
  • 6% db x-trackers Stoxx Global Select Dividend 100 ETF (XGSD) TER 0.5

No, not doing any sort of index-tracking select dividend. I got slaughtered with IUKD a while back until TI educated me and  TA showed me the 4% running costs that, basically, you can’t automate value plays. The huge attractors of value traps will always kill you. If you want to file that flight path you have to fly it on manual, or get sucked into the black holes on auto.

I’m going to swap that sucker with a gratuitous addition from Scott Burns’ portfolio to reflect my views on impending Peak Oil. And yes, it probably does overlap LCTY to some extent, life is just like that. It’s nothing like what IUKD is claimed to do, but since a HYP has a bias to what IUKD should do but doesn’t I don’t feel value is unrepresented.

  • 9% Global exUK DW SmallCap
  • 10% HSBC FTSE EPRA/NAREIT Developed ETF (HPRO) – this is property
  • 10% Lyxor ETF Commodities CRB (LCTY)
  • 10% db x-trackers Stoxx Europe 600 Oil & Gas ETF (XSER)

The proportions are higher than in the original article because I have chopped out the 40% for the gilts and Government bonds, which I don’t need, due to my fixed income.

There’s a lot of noise and hum associated with running something like this, so many funds, and rebalancing. Passive investing bores the bejeesus out of me, so one attractive alternative is to buy a Vanguard Lifestrategy 100% Equity fund ISA from Hargreaves Lansdown and be done with it. And then do the same next year. And the next. And the next, and so on. The HYP would skew that to the UK somewhat, but so be it.

The one thing that scares the hell out of me is Vanguard is so astronomically big. Big rewards mean big temptations. Somewhere, in that big monolith, I am sure there may be a young Nick Leeson or Bernie Madoff in the making, dreaming of riches beyond belief. Perhaps he is there right now, sitting behind the glowing light of a computer terminal in a ventilation shaft with nobody looking over his shoulder. Power corrupts, and it only takes one of them to get through…

ISA and temporal diversification

The annual limit on ISAs may work to one advantage, enforcing temporal diversification. Just as if you are going to quit the market to buy an annuity you should wind down your position over five years, the reverse is true on entering it. As it is I need > 5 years to enter anyway. There’s an argument to say I should use several ISA providers too, but this mitigates against rebalancing, as holdings in separate providers can’t be rebalanced across the divide. This isn’t a problem in the early buying years, but once the ISA has reached steady state it is. I’ll probably compromise and keep the HYP with iii and use a different platform for the rest.

What’s with all this passive rubbish all of a sudden?

I’m unashamedly active with my HYP, in the choice of what to buy, though I try and be Buffetesque in buying and holding; my churn is low, trading is not something I have any skill for. The income from that will be the first line of defence as my fixed income falls below the waterline. The UK is not a bad place at all to seek income from a HYP.

I can do okay with a HYP in the UK but if I want a slice of anywhere else I either have to pay someone like Anthony Bolton to understand it or I can go passive. There’s no point in me trying to pick stocks in areas I only know of as shapes on a map, but I’d like exposure to them. So the scattergun approach of passive investing becomes attractive in the face of no cheap alternatives.

Passive investing gives me concerns in big developed world indices tracked by lots of ageing Baby Boomers about to sell out of the stock market on retirement, like the FTSE100 or the S&P500. I don’t track the FTSE100, and I hate trackingthe S&P500 and would avoid it if I could – I’ve split the US one into 3% S&P500 and 2% US dividend aristocrats because doing the same as everyone else is never a good thing in investing. There seems no S&P allshare open to me. For all the other global stuff which won’t be tracked by loads of people I am relaxed about passive investing. In the end I want to do other things with my life than obsess about far-flung stock markets.

Perspective is also important. I will add value to DW’s project and the time may well come when my financial assets will be less significant. She has managed something I only managed on the side – and that is capturing the entire fruits of her labour by working for a company owned by herself.

There’s a common thought-pattern that you can never become rich when you trade your time for money.  I love the American directness of this straight-between-the-eyes approach

This might offend some people, but as long as you are working for someone else, you are not working for yourself. With that kind of attitude, you are actually thinking as a poor person does. If you are not investing into yourself and your own business, you are going to stay in the position where you are.

I can’t complain too much, I did okay working for other people, and wasn’t entrepreneurial enough to work for myself full-time. I don’t regret it – in the end you will only know joy if you can recognize what enough looks like, and it looks different for each one of us.

It took me two reads to fully take in, but all very interesting stuff. Incidentally, you say that:

“Inflation contains a lot of consumer frippery and iFads that I don’t consume, but which generally come down in price due to technological advances.”

I guess the way round this is to target where you will get hit with inflation. If you are worried about rising food prices say, I’m sure there’s a way to directly hedge that… the best way would be to set up a community farm and grow your own… wait a minute! Obviously there would be more conventional alternatives, but don’t underestimate the value of such projects, you might be better protected than most as you already are.

Thanks for the link Ermine(hidden in the Warren Buffett reference). And I enjoyed your commentary about my article in the pop-up box: “Only in the US could you write an article with a headline like that, as they just don’t do cynical”.

I’m not so sure this is a contrast between our cultures, so much as a clash between the Mr. Money Mustache way of life vs. modern life.

My point is that things really are just as magical and positive as they were in any previous generation – probably more so.

But people waste their time second-guessing the truth of this, leaving a gaping market opportunity for the optimists to waltz in and take whatever they want. I see it as a bizarre psychological loophole in human nature, and I enjoy exploiting it.

One of the most effective techniques for this exploitation? Good old-fashioned honesty :-)

With regards to Bolton, I actually bought a small amount of the FCSS investment trust a week or two ago in my active trading portion of my portfolio. The 10% premium has moved to a 10% discount, China has been in the dumps for ages, and I think there’s little danger of the performance fee kicking in for a bit. I’ll probably sell back at £1 / a narrowed discount .

With respect to bonds and your pension, this is a tricky one. I agree that the pension should be taken into account in some fashion, but I am not convinced it’s a straight swap for allocated fixed income holdings. Browne’s portfolio was designed to be wealth retaining — in a big bear market crash, your portfolio value will fall and you won’t have bonds offsetting it.

On balance I’d probably do what you’re doing, to be fair. I still don’t hold any gilts etc, though I did buy back into LLPC as it was climbing out the trough and I was (riskily!) de-risking (maybe mildly ‘de-equitizing’). But I need to think more about what it means for allocation — really you are doing asset allocation by income, I think? (Income allocation?!)

Thanks as ever for the hat tips. :)

Thanks for this post and the mention. You have clarified for me the idea that a pension is a rough substitute for a substantial bond holding. I knew there had to be a reason why I don’t hold gilts:-)

My equivilised pension pot is about 60% of my non-property net worth. However, as you say, it will slowly erode with inflation since it is CPI linked and I don’t have a high techno spend. I’m hoping, therefore, that a reasonable amount of growth can be had from equities to offset this.

Currently, the non-pension assets are roughly split 40% equities / 60% various forms of cash and I can see this varying 40/60 – 60/40 and back again over the years. A very simple allocation and probably not very clever.

I ought to consider geography more and probably will via ETFs, although some of that diversification is taken care of by the FTSE 100.

Also, in extremis, I have the option of property downsizing, although that is not something I want to consider yet.

my day job is providing various IT and telecoms systems for healthcare providers who deal with the older age groups, including all the finance and operational systems.

So I get to see exactly how long people of all backgrounds and cultures in this area last for.

in 30 years there have been significant gains in life expectancy particularly North European countries with some sort of public funded healthcare. Whilst in recent times these have been eaten away by bad lifestyle choices amongst younger people in these countries you are out of that danger age (or would not have made it to your current age). usually fast cars and fast lifestyles are what do for younger people before their time, and you have chosen to eschew both.

Also you are not a father, comparatively recently married, in the higher income bracket, do not smoke tobacco, nor take hard drugs and have according to your blog calmed down drinking.

I would expect you have a very good chance of reaching a ton and beyond.

Unfortunately then it can still be a lottery what bits of you stay working and which don’t but the impression I get of Suffolk Coastal and Mid Suffolk demographics is they have a significant number of relatively fit, mobile healthy people in their middle years and beyond, who are still involved in local business and physical activities if there is any issue here its an exodus of young people from this area.

Even as a male (who are normally less long lived, though with younger generations smoking, drinking, drugs and cars are closing the gender gap!) you’ve got at least until your 80s before major risk of mobility problems etc.

Which is a fair few years yet so I’d certainly agree with putting away *more* for your middle years than too little…

Hi Ermine another good and thoughtful article
One that makes more sense tham many a main stream media article [MSM]
Heres a link that you might find useful in your quests of how to cope with the system, i won’t say beat, as in my opinion the system is biased in favour of the big players and against the commom people.

http://www.iousathemovie.com/

Keep up the good work.

@Rob This one was a bit too long sorry, it was hard to get it all in, and I don’t do multi-series posts at the mo :) Growing food is indeed part of the approach – particulary for and with other people. It is a non-financial investment and one of the few things that will benefit from rising base costs. Non financial investments are illiquid, nonportable and behave badly compared to finacial investments, but being independent of the financial system have their advantages when that takes a hit below the waterline.

@MMM I loved the article! I couldn’t have gotten away with writing it, though I share much of the sentiment. I suspect readers would have thought I was being cynical and bemoaning the lack of GOFH, rather than standing up straight and saluting it, which is how I read your post ;)

@Monevator, tsk tsk on FCSS, I understand the temptation ;) Take the point on the pension, in HB’s portfolio bonds were acting as both a store of wealth and as a asset allocation hedge. The pension is a serviceable store of wealth as it is RPI linked to a point, but obviously can’t be used as a hedge.

I’m nowhere near as rich as HB was so I have to work within my limitations. I’m also not aiming to retain an invariant net worth as HB was. I am aiming to use my one whack at the cat as well as I can, I am not preserving net worth to pass on to future generations.

On a more general note, a hat tip to your site all round for illuminating and at times straightening out my thinking. This is still the product of my world-view, but without many of your articles the execution would have been less consistent. And I thank you for your hard work!

@SG your where did it all go right? post was an inspiration. I’ve always wondered about bonds, they were such a key part of the classic retirement advice. There is also the strange feeling of entering the stock market on reitrement where everyone else is running the other way. I think the case of a FS pension transforms a lot, particularly where it is possible to live on it alone, that shifts the risk appetite/tolerance greatly. I note monevator’s reservations, however. In your case I think the high cash holding is doing some of that function. I hate cash as a asset class, particularly with all the QE that has gone on :(

@Alex thanks for the prognosis, I’m not sure the odometer’s got three figures on it though ;) As well as thinning out the drinking there are other things I could do (and aim to do, post work) to improve my future health.

Bad lifestyle choices have always been the prerogative of the young, which is why they’re fit enough to get away with it most of the time. Some of what we do to our food and the relative physical inactivity may be storing up issues for the future.

@Lupulco – interesting movie – I didn’t realise the US had such an issue with the cost of healthcare from benefits. Although I’ve tried to avoid it wherever possible, public healthcare in the UK has served me reasonably well. Most of my limited experience of it is from as a child and young adult, however ;)

Some of the issues in the film would make me uneasy. I don’t really expect to get a UK state pension when I reach 66, though it is meant to be a universal benefit. However, the increasing emphasis on removing benefits from those that paid in will polarise things somewhat. I sometimes wonder why I bothered to work and pay higher rate taxes for a significant part of my career when sitting back and enjoying the ride seems a popular option. After all, Ray has Sky TV – I can’t afford it. I had to move out of London because I couldn’t afford it, whereas apparently it’s against people’s human rights nowadays for them to have to move out when the State caps their benefits-paid rent – at a level I couldn’t afford now!

@ermine Poor old Ray’s off to the woodshed again ! I guess he probably deserves it, despite the fact that questioning his welfare perquisites is probably a violation of his rights as well. Be careful, could be a lawsuit pending. :)

Gotta love Ray !

Thanks for this. Very useful for me as my situation is very similar.

[...] Towards a long-term investing strategy – Simple Living in Suffolk [...]

This was a very useful post, though I had to regress it back to the US versions for myself. In my schizophrenic style, I am astraddle two horses: a dividend growth sub-portfolio (70%) and a Permanent Portfolio sub-porfolio (30%). As I age, I am inclining more toward the PP, as it seems to preserve capital very well whilst trickling a reasonable stream of income.

I second what @Monevator says about the pension as a bond replacement for the portfolio. Even if you’re lucky enought to have an inflation adjustment (not all U.S. defined-benefit pensions do), there’s not much upside. In the Permanent Portfolio, the bonds are a counterweight to deflationary cycles and can generate significant upside to counteract the declines in the other asset classes:
http://crawlingroad.com/blog/2009/02/09/permanent-portfolio-25-bond-allocation-faq/

I treat the NPV of my pension (discounted by the U.S. 10-YR Note rate) as a bond currently, along with my salary; but only because I am still in the accumulation phase and don’t want to underweight equities. But once I retire, the pension will simply be subtracted from the portfolio’s total value before I apply my safe-withdrawal rate.

[...] at Simple Living in Suffolk is putting the world to rights as he reflects on a long-term investing [...]

Very glad as ever that you find Monevator useful, ermine. :)

Regarding FCSS, well, I do buy and sell actively quite often, I just don’t recommend it for most people! I am pretty confident of going away with a positive result here. I don’t intend to hold forever, just until sentiment changes on China and/or Bolton, and the discount narrows.

I do like the sort of companies he’s picked, though, more than what you get with a China ETF say.

@Maus, yes, I have a schizophrenic investment approach, where I’ll retain the HYP. Your approach to the FS pension is interesting and may throw very useful light on errors in my views there. Considering it as reducing the amount I need to derive from the investment portfolio would allow me to switch to say Vaguard’s 25% bond portfolio, allowing a bond component to do take up some of the rebalancing slack. I’ll never be able to rebalance against the investments of the FS pension, by definition. Thanks for challenging that assumption, I need to take some time to mull it over.

@Monevator yep, I’ve been tempted by FCSS and its discount too. China makes me queasy, but I have no current exposure to it. Plus I liked the interview where he ‘fessed up to being taken for a ride by some dodgy practices. There aren’t many who can admit that they screwed up. The rule of law is perhaps a little bit different in China than ‘developed’ markets, so I guess the discount is the bad temper of the investors who found that out the hard way ;)

[...] Monevator/TA had already warmed me up to the value of low-cost index funds such as HSBC’s FTAS and L&G’s LGAAAK as a low cost alternative to the ETF passive approach I had initially used, and MwaP reiterated this. I’ve never been drawn to managed funds, though I do favour investment trusts at times. And managed funds of funds looked like a swampy fees quagmire to me, though Vanguard’s LifeStrategy fund is arguably a passive fund of passive funds, which I’m considering for an eventual main index holding. [...]

@ermine — Just in case you didn’t notice, all the brokers began listing LLPC as set on resuming payment at the end of this month.

So looking good for getting 4.25p back per share on 31st May! :)

Long may it last…

@Monevator, yep, I’m normally a NWBD sort of guy myself, but it’s kind of rude not to break out so I did the honourable thing ;)

Curious, our banks limbering up and looking less sickly these days. Getting ready for the Euro sucker punch perhaps…

Ah, I thought you were in from the old days and waiting for the coupon reinstatement. To be honest, I was looking forward to hearing you’re whoop of delight as the world turned out to be a little less gloomy than feared… ;-)

No, I considered it and hemmed and hawed. I just didn’t have that sort of risk appetite, however. In the end a 10% yield always falls into the ‘if it looks too good to be true’ category of risk, though I tip my hat to NWBD which delivers me pretty much spot on 10%. Asking for much more falls into the taking the mickey IMO ;)

> you’re whoop of delight as the world turned out to be a little less gloomy than feared…

Actually if it’s whispered quietly in the background, so far I haven’t had too bad a recession/financial crisis, and things do seem to be looking up. To the extent I may need the Euro sucker punch to get valuations more reasonable, as I’ll still be a net buyer for the next few years. Yield seems to be creeping up, the capital value seems to be more than I paid after sucking out divis, and I am watching my back for tha pin-wielding monkey…

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