Savings and Investments thread

golfaddick · January 2023

PragueAddick said:

So, hangover clearing, but when I peer into my SIPP the dark clouds still lurk 😡.

The best I can get from the H-L platform is that over the last 14 months it's down 13.6%. Based on what y'all have posted I can see that this is a pretty dismal performance. It also isn't hard to find the main culprits. Yes, we are back to Vanguard LifeStrategy 20% - and its sibling the 40% version. Those two combined account for 37% of my SIPP value. The 20% is currently down 15.8% on the year and the 40%, 13.7%.

So the question I would have - and this would be aimed at those who understand the bond markets far better than I do, despite recent attempts to get my head around them, is, what shall I do about them? You may have a further question, why did I have so much in those two? Well they were supposed to provide the ultra-conservative ballast to the portfolio, and of course 2022 was the year when the "60-40" mix came unstuck big time, as bonds crashed along with equities.

When I first realised the extent to which I got done by this, I was tempted to liquidate them and put the proceeds into cash accounts. However I thought that might be hasty, and was rewarded by the LS 20 recovering from -20% to -14%. Which of course was a much bigger gain than I'd get from a cash account offering 4.5% p.a. But since then it has lost 2 percentage points again 😡

So what do we think about bonds this year? Personally I'm a bit worried that high inflation may hang around longer than many want to believe, which is bad for bonds/gilts, right? In addition the Vanguard funds, being UK based, are biased towards UK gilts. They took a specific hammering from the disaster of the Truss/Kwarteng adventure. Wow, that seems like a long time ago, relatively. But the damage was mainly emotional, a global loss of confidence in UK financial responsibility. Has that damage been repaired since? I don't know but the answer will certainly affect the progress of the UK based bond market.

All thoughts on bonds generally, and these Vanguard funds if you have any, welcome. I'm not the only one in this mess on here, as I recall....

Will answer this fully once I'm back at my desk next week. I watched a webinar from Vanguard a couple of weeks ago so will dig my notes out, but basically they said the Bond markets were on the turn & gains could be made going into 23 & 24.

Big thing to remember is that Vanguard funds are basically trackers & if you are in the 20/80 fund (therefore 80% in Bonds) then there is nothing you (or the fund manager) can do, apart from watch the fund track the market - Which in 2022 was downwards......especially Gilts. And with the LS 20 fund being more UK centric then it holds A LOT of gilts.

But then again......tracker funds are SO much cheaper & better than an active fund - ALL those fees being taken by those fund managers are a rip off 🤔😄.

PragueAddick · January 2023

@golfaddick

Yes, I do understand that as passive funds there is limited room for criticism of them, although they do look dismal even against the specific index that platforms offer as a benchmark for such funds.

Here is the numbers-based decision I have to consider with them. What is the likelihood of a V-shaped recovery for the kind of bonds they are in over the next 12 months? That curve demands an increase of over 18% to be achieved. That seems like a big ask.Then when you consider what their role is for me, and many other punters, I believe, you have to consider the guaranteed 4.5% you can get by shifting into a cash account. (or in my case as high as 5.3% if I shifted the money to a Czech account and banked on the Czech crown staying at or above the current FX level with the £, which I think is a better than evens bet)...

Solidgone · January 2023

Instead of worrying about a percentage increase here or there, why not go out and spend it and enjoy the money while you can. Could be dead tomorrow and you can’t take it with you.

redman · January 2023

redman · January 2023

golfaddick said:

PragueAddick said:

So, hangover clearing, but when I peer into my SIPP the dark clouds still lurk 😡.

The best I can get from the H-L platform is that over the last 14 months it's down 13.6%. Based on what y'all have posted I can see that this is a pretty dismal performance. It also isn't hard to find the main culprits. Yes, we are back to Vanguard LifeStrategy 20% - and its sibling the 40% version. Those two combined account for 37% of my SIPP value. The 20% is currently down 15.8% on the year and the 40%, 13.7%.

So the question I would have - and this would be aimed at those who understand the bond markets far better than I do, despite recent attempts to get my head around them, is, what shall I do about them? You may have a further question, why did I have so much in those two? Well they were supposed to provide the ultra-conservative ballast to the portfolio, and of course 2022 was the year when the "60-40" mix came unstuck big time, as bonds crashed along with equities.

When I first realised the extent to which I got done by this, I was tempted to liquidate them and put the proceeds into cash accounts. However I thought that might be hasty, and was rewarded by the LS 20 recovering from -20% to -14%. Which of course was a much bigger gain than I'd get from a cash account offering 4.5% p.a. But since then it has lost 2 percentage points again 😡

So what do we think about bonds this year? Personally I'm a bit worried that high inflation may hang around longer than many want to believe, which is bad for bonds/gilts, right? In addition the Vanguard funds, being UK based, are biased towards UK gilts. They took a specific hammering from the disaster of the Truss/Kwarteng adventure. Wow, that seems like a long time ago, relatively. But the damage was mainly emotional, a global loss of confidence in UK financial responsibility. Has that damage been repaired since? I don't know but the answer will certainly affect the progress of the UK based bond market.

All thoughts on bonds generally, and these Vanguard funds if you have any, welcome. I'm not the only one in this mess on here, as I recall....

Will answer this fully once I'm back at my desk next week. I watched a webinar from Vanguard a couple of weeks ago so will dig my notes out, but basically they said the Bond markets were on the turn & gains could be made going into 23 & 24.

Big thing to remember is that Vanguard funds are basically trackers & if you are in the 20/80 fund (therefore 80% in Bonds) then there is nothing you (or the fund manager) can do, apart from watch the fund track the market - Which in 2022 was downwards......especially Gilts. And with the LS 20 fund being more UK centric then it holds A LOT of gilts.

But then again......tracker funds are SO much cheaper & better than an active fund - ALL those fees being taken by those fund managers are a rip off 🤔😄.

I presume the basis of this is that the expected further interest rate rises likely next year are already built into market prices. In fact to the extent that the market might be over expecting on rate rises. One other thing that worries me slightly though is that the government will need to issue a huge amount of guilts next year, both to pay for the deficit and replacing maturing guilts. Will it have to pay a premium price and this could dampen guilt prices? Be interested to know if Vanguard covered this point.

WishIdStayedinthePub · January 2023

redman said:

golfaddick said:

PragueAddick said:

So, hangover clearing, but when I peer into my SIPP the dark clouds still lurk 😡.

The best I can get from the H-L platform is that over the last 14 months it's down 13.6%. Based on what y'all have posted I can see that this is a pretty dismal performance. It also isn't hard to find the main culprits. Yes, we are back to Vanguard LifeStrategy 20% - and its sibling the 40% version. Those two combined account for 37% of my SIPP value. The 20% is currently down 15.8% on the year and the 40%, 13.7%.

So the question I would have - and this would be aimed at those who understand the bond markets far better than I do, despite recent attempts to get my head around them, is, what shall I do about them? You may have a further question, why did I have so much in those two? Well they were supposed to provide the ultra-conservative ballast to the portfolio, and of course 2022 was the year when the "60-40" mix came unstuck big time, as bonds crashed along with equities.

When I first realised the extent to which I got done by this, I was tempted to liquidate them and put the proceeds into cash accounts. However I thought that might be hasty, and was rewarded by the LS 20 recovering from -20% to -14%. Which of course was a much bigger gain than I'd get from a cash account offering 4.5% p.a. But since then it has lost 2 percentage points again 😡

So what do we think about bonds this year? Personally I'm a bit worried that high inflation may hang around longer than many want to believe, which is bad for bonds/gilts, right? In addition the Vanguard funds, being UK based, are biased towards UK gilts. They took a specific hammering from the disaster of the Truss/Kwarteng adventure. Wow, that seems like a long time ago, relatively. But the damage was mainly emotional, a global loss of confidence in UK financial responsibility. Has that damage been repaired since? I don't know but the answer will certainly affect the progress of the UK based bond market.

All thoughts on bonds generally, and these Vanguard funds if you have any, welcome. I'm not the only one in this mess on here, as I recall....

Will answer this fully once I'm back at my desk next week. I watched a webinar from Vanguard a couple of weeks ago so will dig my notes out, but basically they said the Bond markets were on the turn & gains could be made going into 23 & 24.

Big thing to remember is that Vanguard funds are basically trackers & if you are in the 20/80 fund (therefore 80% in Bonds) then there is nothing you (or the fund manager) can do, apart from watch the fund track the market - Which in 2022 was downwards......especially Gilts. And with the LS 20 fund being more UK centric then it holds A LOT of gilts.

But then again......tracker funds are SO much cheaper & better than an active fund - ALL those fees being taken by those fund managers are a rip off 🤔😄.

I presume the basis of this is that the expected further interest rate rises likely next year are already built into market prices. In fact to the extent that the market might be over expecting on rate rises. One other thing that worries me slightly though is that the government will need to issue a huge amount of guilts next year, both to pay for the deficit and replacing maturing guilts. Will it have to pay a premium price and this could dampen guilt prices? Be interested to know if Vanguard covered this point.

SIPPs down 9.5% but pretty relaxed about that, all things considered. The main culprit was hanging on to Paypal, having got out at the top and then falling for the bull trap.

As for bonds, I can't see how they've quite bottomed yet. Whilst inflation does seem to be heading down, there's a lot of debt to raise and at the same time central banks are supposed to be selling their QE bonds. Still a lot of liquidity to come out of the market and asset prices were massively pumped up over the last twenty years. So I'm not a buyer of bonds yet, but if I was holding, I wouldn't take a loss either - just keep taking the coupons and wait for them to steady out. I can't see how they will ever get back to their peaks though - money was ludicrously cheap.

Central banks could bottle it - again - but I think people are starting to see that cheap money isn't actually very good for most people - homes that people can't afford to buy, pensions in deficit, CEOs getting rewarded from financial engineering instead of building good companies. The productivity 'mystery' might even finally get solved now big corporates can't just solve with cheap labour and leverage.

TelMc32 · January 2023

Oh! So NOW the FTSE decides to go on a surge! 🤷🏻‍♂️😉

Congrats @blackpool72 🏆

blackpool72 · January 2023

TelMc32 said:

Oh! So NOW the FTSE decides to go on a surge! 🤷🏻‍♂️😉

Congrats @blackpool72 🏆

All about the timing 😉

Rob7Lee · January 2023

So who wants to go again?

FTSE100 at 30th June (or last working day)

Get your predictions in by 5pm Friday 20th January?

@blackpool72 you're up first!