What to do with £200k in the bank?

[MikeJ]

You need an investment advisor, not a financial advisor. I'm with Barclays Capital. Then again, I put half the proceeds from selling my company into the market early this year, so what do I know.

 

[Gordon - Commercial Finance]

By my reasoning, the best property move would be 2 bed terraced houses in my area. They have about a 6% rental yield

6% isn't that good a yield on rental property. Call a local letting agent and ask them what kind of property they have waiting lists of people for. Or look on rightmove in your area and see what is lacking and buy that. There will be people with notifications set up on their phones to tell them when a *2 bed semi with a garage in blahtown* comes up and they get on the phone ASAP.

 

[Where do we go from here?]

6% isn't that good a yield on rental property. Call a local letting agent and ask them what kind of property they have waiting lists of people for. Or look on rightmove in your area and see what is lacking and buy that. There will be people with notifications set up on their phones to tell them when a *2 bed semi with a garage in blahtown* comes up and they get on the phone ASAP.

Sorry, forgot there were 12 months in a year. A £100,000 terraced in the right area can rent for about £600 pm. So that's 7.2%.

 

[Where do we go from here?]

You need an investment advisor, not a financial advisor. I'm with Barclays Capital. Then again, I put half the proceeds from selling my company into the market early this year, so what do I know.

These people are basing their advice (Investment and Financial advisors) on the expectation that stocks always go up. What if inflation goes up and interest rates need to go up? Stocks won't go up anymore then. Honestly, the central banks are running out of firepower now interest rates can't go meaningfully lower.

I'd rather have heated debates with people who have money on the line, like me, and then come to my own conclusions on that basis. I don't have enough money to hire someone who could really advise me IMO.

 

[The Byre]

Warren Buffett is selling and not buying.

 

[Where do we go from here?]

Warren Buffett is selling and Buffet always tries to look super confident about the US and the stock market though.

Buffet always tries to look super confident about the US and its stock market though. I assume he didn't actually say he was selling - its this an inference?

 

[The Byre]

No - he sold all his airline and tourism stocks and sold Phillips Oil and trimmed Amazon and Apple. He is still selling. I should really have a look and see what he is also dumping. It's all in those videos about the coming crash (link in my signature).

 

[Gordon - Commercial Finance]

Sorry, forgot there were 12 months in a year. A £100,000 terraced in the right area can rent for about £600 pm. So that's 7.2%.

Still not brilliant. The best yields are 12-13%. Hard to find but they’re out there.

I did a bunch of buy to let in my youth. I found that there was a general misconception that you want to buy flat in cities/large towns as people who live in houses outside of town would just buy those right? But actually the rental liquidity becomes the biggest factor. You can’t charge rents in line with property values because there are stacks of flats to rent nearby (excess supply). I instead bought 2 bed semis in small towns and villages where there was nothing to rent and never struggled for tenants.

I had a flat in Glasgow which was worth £120k and I rented it for £595pcm. At the same time I had a 2 bed semi in a small village in Lanarkshire (where I grew up) that I paid £77k for and it rented for £595 too. I had tenants queuing up for the wee house, but often had a month or two of the flat being empty between lets.

 

[Financial-Modeller]

Sorry, forgot there were 12 months in a year. A £100,000 terraced in the right area can rent for about £600 pm. So that's 7.2%.

Remember that's a gross yield. It may be wiser to estimate net yield for comparison with the other alternatives that you are considering.

My stance - often repeated on here - is that if you want to invest in property, invest indirectly via a fund or REIT enjoy the fact that a professional management team is managing it for you, more cost effectively than most can individually. Only buy direct property if you have a specialist skill or can benefit from your own added value, e.g. development experience.

 

[SillyBill]

These people are basing their advice (Investment and Financial advisors) on the expectation that stocks always go up. What if inflation goes up and interest rates need to go up? Stocks won't go up anymore then. Honestly, the central banks are running out of firepower now interest rates can't go meaningfully lower.

I'd rather have heated debates with people who have money on the line, like me, and then come to my own conclusions on that basis. I don't have enough money to hire someone who could really advise me IMO.

My business banks c. £400k a year after tax retained earnings. And used to make a lot more than that before we sold the money-spinner part off. Not sure your posts add up as you can afford very good advice if you are in the position you claim to be. A lot harder to earn it than manage it IMO. I maximise on a personal level every single thing I can from SIPP contributions to ISA allowances to salary vs. dividend payments. Where we've let cash build in the business we've used it to purchase the equity of other businesses outright (4 acquisitions) and occasional large dividends to strip excess cash.

My personal financial affairs are all managed independently. I won't given 1/3 of my return to an IFA or money manager who won't and can't beat the stock market yet will charge 2% management fees on a 6% expected return...

As for stocks, there are always opportunities. Potash is a badly hit sector for instance and I've been accumulating within it ready for a new cycle. I wouldn't be surprised if oil will be 300USD by 2030 in the inflation cycle to come, I consider all the oilies to be very risky short term bets but very good medium to long term bets. You take your picks...

 

[tony84]

It really depends on what you want to do.
I bought a house for £85k and spent £10k doing it up. I then sold it for £155k.
If house prices had dropped, I would have been able to rent it out for £650 where the mortgage was about £300 a month on repayment.

I am not a fan of being a landlord, I have been there are both tenants I would quite happily never bump into again, one of them I would not P on if I seen her on fire.

If the adviser at your accountants is limited to max out your pension, then find another. They are not usually swayed by commission, my understanding is financial advisers no longer get commission and now rely on charging fees.

With the amount of money you have could you not buy a large commercial building and either let it out as storage or convert it to offices/workshops and sublet it to various businesses. There is one near us which lets out the ground floor units as shop type units and the inner units as storage and then upstairs is let out as office space - https://www.bigyellow.co.uk/cheadle-and-wilmslow-self-storage-units/ - It must make a fortune. They also let out the car park for airport parking, a car sales lot, a car wash and then a burger van. It wouldnt surprise me if they were also charging for advertising on the roof for the planes passing over.

 

[Deleted member 59730]

Spend it.

There aint no pockets in shrouds.

 

[simon field]

See the world buddy.

 

[Where do we go from here?]

Warren Buffett is selling and not buying.

Thanks for pointing me to the videos... looks roughly in line with my existing concerns. Bottom line is to remain liquid and snap up the bargains when they inevitably come.

That being said, I do remember seeing posts on some forums from 2009 and the early 2010s where there was a large contingent of contributors who were convinced papering over the cracks wouldn't work and another crash was imminent. Those guys have been waiting for 10+ years in cash... can we be sure this time is IT?

Who was it who said about markets remaining irrational for longer than we can remain solvent?

 

[SFH0791]

don't buy a car or anything like....

Property, current areas I would recommend investing

Peterborough > Average property price is £220k for 3 bedroom hosue rental income of £820 PM and growth of £7k per year on the property price

Aylesbury > Very good area, use it as airbnb, expect a turnover of £1.5k per week Pre-covid.

 

[Where do we go from here?]

Still not brilliant. The best yields are 12-13%. Hard to find but they’re out there.

I'd love to know where to look to find those. Is this residential?

 

[SFH0791]

if you wanna go a little deep with big returns

Buy in London especially hammersmith and fulham

£700k property you can convert into HMO, should get about 5 studio bedrooms or at push 6 and even 7 if you can permission from the council for one in the garden

Expect rental income of £800 per room

I have managed to get 6, my mortgage is interest only

Property had growth of £15k last year equity

£4800 rental income per month, but i provide internet, and bills included costing me £500 extra per month so gross before mortgage of £4300

 

[Gordon - Commercial Finance]

T

 

[Where do we go from here?]

My business banks c. £400k a year after tax retained earnings. And used to make a lot more than that before we sold the money-spinner part off. Not sure your posts add up as you can afford very good advice if you are in the position you claim to be. A lot harder to earn it than manage it IMO. I maximise on a personal level every single thing I can from SIPP contributions to ISA allowances to salary vs. dividend payments. Where we've let cash build in the business we've used it to purchase the equity of other businesses outright (4 acquisitions) and occasional large dividends to strip excess cash.

My personal financial affairs are all managed independently. I won't given 1/3 of my return to an IFA or money manager who won't and can't beat the stock market yet will charge 2% management fees on a 6% expected return...

As for stocks, there are always opportunities. Potash is a badly hit sector for instance and I've been accumulating within it ready for a new cycle. I wouldn't be surprised if oil will be 300USD by 2030 in the inflation cycle to come, I consider all the oilies to be very risky short term bets but very good medium to long term bets. You take your picks...

I think what you call "not adding up" is just my lack of experience in this area. Prior to 2019 my maximum net profit was in the 60k range, and prior to 2016 I refused to work anything but part-time in my minimum wage job (before I started the business). FYI, I'm 30ish now. As I said, this is a new "problem" for me.

What would your suggestions be? What should I be researching? Who should I be consulting? etc.

I consume a lot of information relating to the markets and business, but it amounts to just casting a net and hoping I find/catch something useful. A more targetted approach would be welcome if you could provide some direction.

I really appreciate your input.

 

[SillyBill]

I think what you call "not adding up" is just my lack of experience in this area. Prior to 2019 my maximum net profit was in the 60k range, and prior to 2016 I refused to work anything but part-time in my minimum wage job (before I started the business). FYI, I'm 30ish now. As I said, this is a new "problem" for me.

What would your suggestions be? What should I be researching? Who should I be consulting? etc.

I consume a lot of information relating to the markets and business, but it amounts to just casting a net and hoping I find/catch something useful. A more targetted approach would be welcome if you could provide some direction.

I really appreciate your input.

Boris Johnson/Sunak are priming us for a Roosevelt "New Deal" type programme of works. That should be enough of a guiding hand. So infrastructure would be a good place to start. Looking at the distortion of the major stock indices toward FANGs etc. (appraise these companies on fair value, not on the insane P/E ratios they trade at) and the % decline in capitalisation of the "industrial" sector; my own instinct is we've tapped out on the consumer led economy in terms of GDP growth in the West. The next phase of growth, acknowledged by politicians now, is re-teething the economy with a bold new industrial and manufacturing strategy. With that in mind, I expect the market to do as it always does, rubber band type snap in the opposite direction and the industrial will outperform once again.

Telecoms is a sector that will have gigantic CAPEX (a lot state sponsored) poured into it in the next 10 years IMO and is a sector that would suit a reversal to inflation (money printing hasn't even started yet), BT, VOD, TEF etc. still reasonable value if you are a long term buyer, certainly buying at hefty Jan discounts too. Ignore the melt-up we're having now and the likely (imo) second leg down, you won't time it.

I also think time and time again the market gets it wrong on o&g. Low prices = no asset development, shut-ins, reduced oilfield/well maintenance, lay offs...and the inevitable production decline lag just when demand starts to recover. US shale has peaked, research the decline rates in the major basins...the developing world will not wean off oil quicker than we all start driving battery operated cars. Demand will go up before it declines. And big oil will own blue and green hydrogen IMO. Shell, BP etc. will use their infrastructure platform like only they can to make it a reality, expect a lot of acquisitions etc. BP/Shell could step in and buy out someone like Drax overnight once the concept is proved. I actually am more bullish on hydrogen than I am battery for a lot of reasons. I always take 10-20 year views on things.

Property in the UK as an investment class (i.e. not to live in) is personally done for me, all risk at record low rates and record high prices IMO. Knowing when to cash in is the sign of a good investor, not expecting the same returns you've always had...just because. If we were starting at these prices with late 70's early 80s rates then I'd say interesting investment...looking forward over 30 years (at your age of 30) then on that timeline I would not wager my own money against a full reversal of the cycle of the last 30 years+ i.e. an eventual return to 5+ base rate. Prices being inversely proportional to rates, I don't fancy more exposure this far in. Doesn't matter if it happens tomorrow or in 5 years or in 10 either, from my long term timescale it doesn't have the legs for anything other than an inflation adjusted increase from topped out highs. So not really an asset class on my radar.

There are lots of commodities I like for lots of different reasons. This post is long enough as it is though. Good luck.

 

[Where do we go from here?]

Boris Johnson/Sunak are priming us for a Roosevelt "New Deal" type programme of works. That should be enough of a guiding hand. So infrastructure would be a good place to start. Looking at the distortion of the major stock indices toward FANGs etc. (appraise these companies on fair value, not on the insane P/E ratios they trade at) and the % decline in capitalisation of the "industrial" sector; my own instinct is we've tapped out on the consumer led economy in terms of GDP growth in the West. The next phase of growth, acknowledged by politicians now, is re-teething the economy with a bold new industrial and manufacturing strategy. With that in mind, I expect the market to do as it always does, rubber band type snap in the opposite direction and the industrial will outperform once again.

Telecoms is a sector that will have gigantic CAPEX (a lot state sponsored) poured into it in the next 10 years IMO and is a sector that would suit a reversal to inflation (money printing hasn't even started yet), BT, VOD, TEF etc. still reasonable value if you are a long term buyer, certainly buying at hefty Jan discounts too. Ignore the melt-up we're having now and the likely (imo) second leg down, you won't time it.

I also think time and time again the market gets it wrong on o&g. Low prices = no asset development, shut-ins, reduced oilfield/well maintenance, lay offs...and the inevitable production decline lag just when demand starts to recover. US shale has peaked, research the decline rates in the major basins...the developing world will not wean off oil quicker than we all start driving battery operated cars. Demand will go up before it declines. And big oil will own blue and green hydrogen IMO. Shell, BP etc. will use their infrastructure platform like only they can to make it a reality, expect a lot of acquisitions etc. BP/Shell could step in and buy out someone like Drax overnight once the concept is proved. I actually am more bullish on hydrogen than I am battery for a lot of reasons. I always take 10-20 year views on things.

Property in the UK as an investment class (i.e. not to live in) is personally done for me, all risk at record low rates and record high prices IMO. Knowing when to cash in is the sign of a good investor, not expecting the same returns you've always had...just because. If we were starting at these prices with late 70's early 80s rates then I'd say interesting investment...looking forward over 30 years (at your age of 30) then on that timeline I would not wager my own money against a full reversal of the cycle of the last 30 years+ i.e. an eventual return to 5+ base rate. Prices being inversely proportional to rates, I don't fancy more exposure this far in. Doesn't matter if it happens tomorrow or in 5 years or in 10 either, from my long term timescale it doesn't have the legs for anything other than an inflation adjusted increase from topped out highs. So not really an asset class on my radar.

There are lots of commodities I like for lots of different reasons. This post is long enough as it is though. Good luck.

Thanks for this. It makes me wonder what kind of business and background you're from. You're not a typical business owner - this is all macro/market/business cycles stuff.

To be honest, it encourages a lot more questions than I know I have a right to request answers to. I really appreciate the time you took to type all this though.

I hope I manage to hold on to my money for long enough so that I can learn and confidently make these kinds of calls.

Thanks again.

 

[Gordon - Commercial Finance]

I hope I manage to hold on to my money for long enough so that I can learn and confidently make these kinds of calls.

All the best.



And I’ll have my RS6 in Nardo Grey. Thanks.

 

[Red Wood]

If you are sure your cash balance will continue to grow in h biz account, put the £200K In an ETF and leave it. Let that sucker compound.

You don't need to worry about timing the market, the current price is irrelevant.

 

[revs]

Over the last 18 months I've been steadily moving my portfolio to more defensive assets. My portfolio allocation now consists of:

10% iShares Physical gold ETC
2% iShares Physical Silver ETC
20% Royal London Short Duration Global Index Linked Fund
10% iShares Global Inflation Linked Government Bonds
10% Vanguard Global Bond Index
40% Equities (mostly Vanguard, iShares ETF's but a tilt towards Emerging Markets and Value)
8% Capital Gearing Trust

Gold/Silver/Commodities/Inflation linked bonds are there to protect my portfolio from inflation.

My aim is to move to 90% equities when the market crashes.

For a low risk investment you could just invest in Capital Gearing Trust which aims to preserve wealth.

 

[Deleted member 59730]

I am quite serious about spending it. If you are earning now you will have the confidence to earn again in the future. Take time off to see the world and live. As a freelance photographer taking time off was expensive for me but I still traveled with my wife to some fairly unusual and exotic places, took risks and survived. Although our assets went up and down over the years we were never close to not living well. I'm now semi-retired and still have a problem spending our assets.

Accumulating assets is the easy part. Turning it into a lifestyle is more difficult.

 

[mattk]

My aim is to move to 90% equities when the market crashes.

Are you going to wait another 10 years for the next crash?

 

[revs]

yes, I'm prepared to wait another 10 years for the next crash. I'll only increase my exposure to equities when the risk/reward makes financial sense - at the moment, it doesn't.

 

[Red Wood]

yes, I'm prepared to wait another 10 years for the next crash. I'll only increase my exposure to equities when the risk/reward makes financial sense - at the moment, it doesn't.

TIME in the market is more important than TIMING the market!

 

[SillyBill]

Thanks for this. It makes me wonder what kind of business and background you're from. You're not a typical business owner - this is all macro/market/business cycles stuff.

To be honest, it encourages a lot more questions than I know I have a right to request answers to. I really appreciate the time you took to type all this though.

I hope I manage to hold on to my money for long enough so that I can learn and confidently make these kinds of calls.

Thanks again.

Chemical manufacturing is my business so nothing to do with finance as it were but I've been investing since I was 18 and in that time gradually built up a network of contacts in various industries who are worth listening to (and I always ask questions) and found communities online of like-minded people/investors where I learn far more than I contribute. And I like to think I know a little because put simply I've stomached the losses to prove it over the years. You learn far more by your mistakes; you don't generally repeat mistakes once you've lost money that is materially significant to you.

And taking a macro look at the world is at least an input to whatever I do. I mostly look at commodities or materials as that is what I understand (Warren Buffett's best advice being only invest in something if you understand it). Currently evaluating where is the best way to expose myself to any winners of graphene related commercial development and hydrogen as my personal belief is these will be winning technologies and currently have substantial interest and investment arriving into them (always a good sign). I pick a few small areas and drill down into them as much as I can, no-one can be an expert in everything.

 

[Where do we go from here?]

For a low risk investment you could just invest in Capital Gearing Trust which aims to preserve wealth.

I've spent some time looking into CGT over the past few days. Am I correct to read that if we deduct the CPI from the returns on the attached graph we're left with the actual return on capital?

For example, return in 2019 was 8%. CPI for 2019 was 1.8. Therefore CGT return was 6.2%, right?

 

[Where do we go from here?]

Chemical manufacturing is my business so nothing to do with finance as it were but I've been investing since I was 18 and in that time gradually built up a network of contacts in various industries who are worth listening to (and I always ask questions) and found communities online of like-minded people/investors where I learn far more than I contribute. And I like to think I know a little because put simply I've stomached the losses to prove it over the years. You learn far more by your mistakes; you don't generally repeat mistakes once you've lost money that is materially significant to you.

And taking a macro look at the world is at least an input to whatever I do. I mostly look at commodities or materials as that is what I understand (Warren Buffett's best advice being only invest in something if you understand it). Currently evaluating where is the best way to expose myself to any winners of graphene related commercial development and hydrogen as my personal belief is these will be winning technologies and currently have substantial interest and investment arriving into them (always a good sign). I pick a few small areas and drill down into them as much as I can, no-one can be an expert in everything.

What do you think about the whole balanced portfolio approach?

Also, I'm toying with the idea, as suggested by Revs, of investing a very large chunk in CGT or similar, but then reallocating capital to individual stock/commodity ideas as I feel competent to do so. In the meantime, would this seem more reasonable than staying in cash? I understand from your posts that you feel that it's a raw deal when fees are taken into account.

 

[SillyBill]

What do you think about the whole balanced portfolio approach?

Also, I'm toying with the idea, as suggested by Revs, of investing a very large chunk in CGT or similar, but then reallocating capital to individual stock/commodity ideas as I feel competent to do so. In the meantime, would this seem more reasonable than staying in cash? I understand from your posts that you feel that it's a raw deal when fees are taken into account.

I don't feel it is a raw deal, it is an exceptionally poor deal to be frank, for one party at least. Just looking at it on Hargreaves...1.81% annual management charge. That management fee would knock hundreds of £K off a decent pot compounded over the sort of period you're looking at. I'd encourage you to do some basic research and talk to people who think a little differently to others (prerequisite if you want better results than "average"); a good place to start is going onto "FIRE" forums. I can guarantee you not a single person on a FIRE forum will be in a fund like that nor would they (or I) even consider it...and it isn't a coincidence this "type" of person shares a similar outlook and similar performance. It is more a case of being intelligent enough to not share 30+% of your wealth with someone who is not doing a lot for that.

You are 30 years old so a good question back to you is why is capital preservation driving your approach now? Your age and when you need to access capital is the single biggest consideration (IMO) of how you invest. If you think and position correctly it shouldn't matter for you what happens over the near term and that is a luxury you ought to exploit. You won't time the market, you likely won't beat the market and yet you have a long time to be in it for you to "to win". That is my take. So to me you are looking at it the wrong way around.

And IMO you are overly concerning yourself about cash - I think it is a great asset class for this very moment. It puts you in a very strong position. 3-4 months ago cash was the most desired asset class and from where I am standing there is a very good chance certain areas of the market, if not the whole market, will see another sea of liquidated positions as they hunt for cash. A lot of sectors clearly have deferred pain, commercial property, leisure etc...quite obviously a lot of that pain isn't priced into the market so from where I sit cash is okay.

I can't recall where your cash is but I also manage my father's estate/portfolio and rather than his cash being in the bank earning nothing, it is transferred over into a NS&I Income Bond account to take some of the sting off inflation of it yet retain accessibility/minimum risk.

Yes I think a balance portfolio is essential, I follow my own rules in that respect to my own formula. I count my house as my property investment (why wouldn't I?), I have some land, my own business is "equity", I have gold & silver, stocks and shares, cash and some bonds (not a lot). I also like a significant weighting of stocks to be based outside the UK and traded in foreign currencies to Sterling, I think that is important if all your assets like property and business are UK centred, at least that way you are backing different horses.

 

[Where do we go from here?]

I don't feel it is a raw deal...

it is an exceptionally poor deal to be frank, for one party at least. Just looking at it on Hargreaves...1.81% annual management charge. That management fee would knock hundreds of £K off a decent pot compounded over the sort of period you're looking at.

I understand I'd be handing a lot of money to them over the long term, but my initial idea was to go with CGT (or similar) until I became more comfortable with managing my own investments/had the time to learn how to do so - beating inflation to leave my purchasing power unaffected in the meantime.

My goal is to keep my capital safe so that I am able to draw down on it if required to cover living expenses. My business is e-commerce, and I don't know how long I will make the profits I'm making. I'm naturally pessimistic but, if I put on my optimistic hat, I can extrapolate that in 5 years we could be sitting on £5-6million. That being said, psychologically speaking, the risk of a reduction or cessation of income is what's driving my interest in wealth preservation. I would rather have that money to draw down on starting in X years, than do anything riskier that would potentially make a higher return. This motivation is further complicated by the fact that I have some artistic endeavors I'd like to pursue once/if this business declines so I would ideally like to be able to take some time out before working out my next business move.

a good place to start is going onto "FIRE" forums

Checking it out now. Thanks

You are 30 years old so a good question back to you is why is capital preservation driving your approach now? Your age and when you need to access capital is the single biggest consideration (IMO) of how you invest. If you think and position correctly it shouldn't matter for you what happens over the near term and that is a luxury you ought to exploit. You won't time the market, you likely won't beat the market and yet you have a long time to be in it for you to "to win". That is my take. So to me you are looking at it the wrong way around.

I think this is answered in my above paragraph. I suppose I value security over growth. If higher growth can be achieved at less than proportional risk, then I'm all for it. Once again though, I'm not yet competent to make these decisions.

I can't recall where your cash is but I also manage my father's estate/portfolio and rather than his cash being in the bank earning nothing, it is transferred over into a NS&I Income Bond account to take some of the sting off inflation of it yet retain accessibility/minimum risk.

It's all sitting in the business bank account. My question here would be... why is an NS&I Income Bond a better option than CGT. I have zero experience/knowledge of bonds, but reading up I see a 1.15% return.

Once again, I really appreciate the back & too. This is extremely helpful to me.

 

[mattk]

It's all sitting in the business bank account. My question here would be... why is an NS&I Income Bond a better option than CGT. I have zero experience/knowledge of bonds, but reading up I see a 1.15% return.

Your capital is protected in an NS&I Bond, whereas it is not in CGT.

CGT seems a very strange investment. Poor returns during the "good" years and it dropped in line with everything in the March downturn.

Compare CGT to a managed fund like Fundsmith and you'll see how much money you're leaving on the table.

 

[Where do we go from here?]

Your capital is protected in an NS&I Bond, whereas it is not in CGT.

CGT seems a very strange investment. Poor returns during the "good" years and it dropped in line with everything in the March downturn.

Compare CGT to a managed fund like Fundsmith and you'll see how much money you're leaving on the table.

To which I'd reply: in 40 years CGT has only had 1 year of negative returns (2%) and has beat inflation in 35(ish) of those years. So, compared to the NS&I bond, that's better, right?

I'm just playing devil's advocate - I'd never heard of CGT until 3 days ago and I'm just trying to put the pieces together.

Thanks for the Fundsmith recommendation. I need to look at the historical returns of many funds so that I have some context to evaluate them.

 

[Deleted member 222114]

I'm pretty sure you're not gonna meet anyone in the same position.

I disagree. I know more than one person with the same problem.

Once you buy the amazing car you always wanted, you find that you get that out of your system and then start to think of how to actual make real money that makes 200k look like pocket change.

 

[SillyBill]

It's all sitting in the business bank account. My question here would be... why is an NS&I Income Bond a better option than CGT. I have zero experience/knowledge of bonds, but reading up I see a 1.15% return.

In no way did I suggest NS&I Income Bond was comparable to a fund, "CGT" or otherwise so the point is moot. Nor was it my advice to put all or indeed any of your money in a NS&I Income Bond. I was merely giving one example of an easy way to mitigate the inflation erosion of cash in a low risk manner with low cost easy entry and exit. In a portfolio I would consider a NS&I Income Bond position as a "cash" asset despite it being "invested". But that is me. That is not one and the same with equity or bond positions which would be a different slice of the pie chart allocation.. Naturally the whole idea of a cash position is is to have capital on hand, not at risk and ready to spend or deploy. Anyway, this is my last post on this topic, as I said good luck.

 

[Where do we go from here?]

In no way did I suggest NS&I Income Bond was comparable to a fund, "CGT" or otherwise so the point is moot. Nor was it my advice to put all or indeed any of your money in a NS&I Income Bond. I was merely giving one example of an easy way to mitigate the inflation erosion of cash in a low risk manner with low cost easy entry and exit. In a portfolio I would consider a NS&I Income Bond position as a "cash" asset despite it being "invested". But that is me. That is not one and the same with equity or bond positions which would be a different slice of the pie chart allocation.. Naturally the whole idea of a cash position is is to have capital on hand, not at risk and ready to spend or deploy. Anyway, this is my last post on this topic, as I said good luck.

Just for clarification, It wasn't my understanding that you "suggested an NS&I Income Bond was comparable to a fund", nor that it was your advice to do or not do anything. Ok, thanks.

 

[mattk]

To which I'd reply: in 40 years CGT has only had 1 year of negative returns (2%) and has beat inflation in 35(ish) of those years. So, compared to the NS&I bond, that's better, right?

I'm just playing devil's advocate - I'd never heard of CGT until 3 days ago and I'm just trying to put the pieces together.

Thanks for the Fundsmith recommendation. I need to look at the historical returns of many funds so that I have some context to evaluate them.

Remember "past performance is not indicative of future returns".

As @SillyBill says, equity investment is long term. I would be less worried about single year performance and be looking more at what something has returned over a five or even ten year period.

I don't think you can say CGT is better than NS&I. They are different vehicles with different purposes. If you want to guarantee your capital, then NS&I will do that.

In my opinion, the returns on CGT look woeful, but you have to weight risk versus reward.

 

[Where do we go from here?]

Remember "past performance is not indicative of future returns".

As @SillyBill says, equity investment is long term. I would be less worried about single year performance and be looking more at what something has returned over a five or even ten year period.

I don't think you can say CGT is better than NS&I. They are different vehicles with different purposes. If you want to guarantee your capital, then NS&I will do that.

In my opinion, the returns on CGT look woeful, but you have to weight risk versus reward.

I think we're just looking at this from a different level of sophistication, at this point. You need to consider that I'm coming from a 100% newb standpoint. The question is my mind is:

"As someone who has no experience in this area, and who is concerned about leaving his cash in the bank, what would be a quick fix, low risk, allocation of capital while I learn?"

From that perspective, CGT and NS&I COULD be (not definitely are) comparable for that purpose, obviously with some different features and benefits, though. Both will reduce the effects of inflation, although CGT doesn't do this with certainty, but then again, NS&I will certainly not make a return.

Regarding CGTs returns. I'm really not qualified to make the judgement yet, but it's possible CGTs returns are "woeful" because they've not taken on what they considered to be a disproportionate risk. I hear that over the past decade anyone with a value-based investment philosophy has underperformed. Trust in the CBs ability to inflate equities was the determining factor in success, right? This is a reason that I'm liable to not trust 10 year track records.