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Personal Assets v Capital Gearing v RICA?

Closed-end funds and OEICs
Aminatidi
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Personal Assets v Capital Gearing v RICA?

#173959

Postby Aminatidi » October 15th, 2018, 6:19 pm

Contemplating a chunk of one of these as a smoother to a portfolio (I contemplate a lot but actually change very little :))

PNL look heavy on gold as does RICA, CGT less so.

Ruffer seem to be permanently predicting Armageddon, PNL looks very simple to figure out (not a bad thing to know what you're buying), CGT slightly less obvious.

If you were trying to decide a home between the three of them what things would you take into consideration?

RececaDron
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Re: Personal Assets v Capital Gearing v RICA?

#173961

Postby RececaDron » October 15th, 2018, 6:29 pm

How would you fund the purchase? Would you be selling other stuff that's already fallen sharply in price?

And what proportion of your portfolio would you be intending to park in this new purchase? Do you realise that to achieve some noticeable "smoothing" you'd be having to sink a significant chunk into it?

When markets were going up rather than down would you then be regretting sinking so much money into a "portfolio smoother" that went sideways a lot?


Just asking...

Aminatidi
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Re: Personal Assets v Capital Gearing v RICA?

#173966

Postby Aminatidi » October 15th, 2018, 6:41 pm

RececaDron wrote:How would you fund the purchase? Would you be selling other stuff that's already fallen sharply in price?


Money that's in stays in, this would be some of the remaining allowance.

RececaDron wrote:And what proportion of your portfolio would you be intending to park in this new purchase? Do you realise that to achieve some noticeable "smoothing" you'd be having to sink a significant chunk into it?


Right now I'm 100% equities and with the beauty of hindsight and as a fairly new investor the last couple of weeks is making me question what I thought my risk tolerance was.

Losing some return in exchange for lowering risk is something I'm considering.

Not sure of numbers but let's assume somewhere around 30%-40%.

RececaDron wrote:When markets were going up rather than down would you then be regretting sinking so much money into a "portfolio smoother" that went sideways a lot?
Just asking...


Possibly. As I said I'm considering a few options, I've not decided anything yet.

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Re: Personal Assets v Capital Gearing v RICA?

#174041

Postby Nocton » October 16th, 2018, 8:29 am

I used to hold PNL and found that over the last 10 years it so underperformed that it was/would have been better just to stick with a general IT like Witan and accept the ups and downs with overall much more up. If you think that there is going to be a really big sell off then I should just sell some of your shares and hold cash. That way you are in a good position to buy back into the market when you think the time is right and there are bargains to be had. By the way, if you are automatically re-investing dividends then you have some automatic smoothing already.

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Re: Personal Assets v Capital Gearing v RICA?

#174043

Postby RececaDron » October 16th, 2018, 8:49 am

Having just seen your Buffetology thread, viewtopic.php?f=56&t=14066&p=171766#p171766 it says you had 70k in investment ISAs and 140k in cash.

2:1 cash:equities looks conservative. Maybe I've misunderstood.

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Re: Personal Assets v Capital Gearing v RICA?

#174044

Postby Aminatidi » October 16th, 2018, 8:57 am

Nocton wrote:I used to hold PNL and found that over the last 10 years it so underperformed that it was/would have been better just to stick with a general IT like Witan and accept the ups and downs with overall much more up. If you think that there is going to be a really big sell off then I should just sell some of your shares and hold cash. That way you are in a good position to buy back into the market when you think the time is right and there are bargains to be had. By the way, if you are automatically re-investing dividends then you have some automatic smoothing already.


Yes I see that point of view as well.

Regards what I think, as I'm often reminded when asking others what they think "nobody has a crystal ball" :)

Like I said, the recent wobble did make me question whether I'd be as comfortable waking up one morning 20% or 40% down as I thought I'd be as it certainly didn't feel great when it was "only" the 9% though thankfully previous gains helped with the psychology.

I think the struggle is I already hold too much cash but waver between keeping it (cash is king) or trying to do something useful with it.

In my defense I ask a ton of questions but I've not changed course at any point so at least I'm not on here with 25 funds/ITs that have accumulated because I've changed direction every couple of months to try and keep up with events :)

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Re: Personal Assets v Capital Gearing v RICA?

#174045

Postby Aminatidi » October 16th, 2018, 9:00 am

RececaDron wrote:Having just seen your Buffetology thread, viewtopic.php?f=56&t=14066&p=171766#p171766 it says you had 70k in investment ISAs and 140k in cash.

2:1 cash:equities looks conservative. Maybe I've misunderstood.


That thread is correct.

I struggle to see my entire holdings (savings, property, ISA, pension) as a portfolio - I know it is but it's a mindset thing and is difficult to get out of.

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Re: Personal Assets v Capital Gearing v RICA?

#174105

Postby RececaDron » October 16th, 2018, 12:13 pm

Aminatidi wrote:I struggle to see my entire holdings (savings, property, ISA, pension) as a portfolio - I know it is but it's a mindset thing and is difficult to get out of.


Then try harder ;)

In response to another poster who admitted to updating their portfolio spreadsheet multiple times a day, I wrote this...
viewtopic.php?f=56&t=13961&p=171903#p171903

If you've not already done so create a spreadsheet with a monthly entry for the current value of each of your holdings (the things you've listed above, including your big pile of cash, but excluding your own home). Calculate the total of these holdings, call it "Total Investments"

Create a plot (chart) of that monthly Total Investments figure. Include in the plot a trend line of monthly Total Investments, something like a 10 period (monthly) moving average.

Don't plot the individual holdings. Change the colour of the Total Investments plot to be very light grey. Change the colour of the 10 period moving average trend line to be bright green.

Update your spreadsheet at the end of each month.

There's your portfolio smoothing right there. No fee required.

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Re: Personal Assets v Capital Gearing v RICA?

#174218

Postby Aminatidi » October 16th, 2018, 6:40 pm

Multiple times a day :o

Well I'm certainly not there. Bottom line is I have too much cash and as I'm working it will keep flowing in.

It's a nice problem to have, I get it, but at the moment things feel very binary in that it's either in cash or 100% equities with no in-between.

Factor inflation in and on the cash I'm arguably losing money leaving it in the bank hence considering some very low risk options for a chunk of it as next April that's another £20K available if I want to keep things wrapped etc.

Amin

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Re: Personal Assets v Capital Gearing v RICA?

#174457

Postby Aminatidi » October 17th, 2018, 3:02 pm

thanks, I did hold RIT, always find it interesting how it's often classed as defensive yet it appeared like it took a total kicking in 2008?

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Re: Personal Assets v Capital Gearing v RICA?

#174518

Postby richfool » October 17th, 2018, 7:46 pm

Moderator Message:
referenced post deleted on posters request

Aminatidi, It did "(take a total kicking"!). I held it at the time and got rid of it when it eventually recovered a reasonable extent. I haven't held it since.

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Re: Personal Assets v Capital Gearing v RICA?

#174602

Postby Aminatidi » October 18th, 2018, 8:00 am

richfool wrote:
Aminatidi wrote: thanks, I did hold RIT, always find it interesting how it's often classed as defensive yet it appeared like it took a total kicking in 2008?

Aminatidi, It did "(take a total kicking"!). I held it at the time and got rid of it when it eventually recovered a reasonable extent. I haven't held it since.


I do hear good things about using it as a diversifier as it does hold a ton of stuff mere mortals can't easily get, but yes, for downside protection I'm struggling to see it.

StOmer

Re: Personal Assets v Capital Gearing v RICA?

#174667

Postby StOmer » October 18th, 2018, 12:26 pm

One good thing about Personal Assets are its Quarterly Reports, particularly the older ones. The later ones tend to argue more about why its poor performance is okay, but the older ones are very instructive. https://patplc.co.uk/literature/quarterly-reports

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Re: Personal Assets v Capital Gearing v RICA?

#174668

Postby Aminatidi » October 18th, 2018, 12:28 pm

StOmer wrote:One good thing about Personal Assets are its Quarterly Reports, particularly the older ones. The later ones tend to argue more about why its poor performance is okay, but the older ones are very instructive. https://patplc.co.uk/literature/quarterly-reports


Curiously enough I'm working my way backwards through these and I've literally just opened number 84.

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Re: Personal Assets v Capital Gearing v RICA?

#174672

Postby Aminatidi » October 18th, 2018, 12:50 pm

I think where I'm finding them useful is as some kind of counter to the "slow boring pointless" side of the PNL/CGT/RICS type debate.

I find it fascinating that if you go 50/50 between PNL and 100% equities you end up with near enough a 75/25 mix.

Possibly a good combination of attack/defence.

StOmer

Re: Personal Assets v Capital Gearing v RICA?

#174681

Postby StOmer » October 18th, 2018, 1:29 pm

Aminatidi wrote:I find it fascinating that if you go 50/50 between PNL and 100% equities you end up with near enough a 75/25 mix. Possibly a good combination of attack/defence.

I believe they have previoulsy mentioned that such a mix with perhaps Scottish Mortgage would be a good balance.

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Re: Personal Assets v Capital Gearing v RICA?

#174684

Postby Aminatidi » October 18th, 2018, 1:39 pm

Yeah I'm not that brave but of the 50% a mix of Fundsmith and Lindsell Train looks a possibility as those are where the money is now anyway.

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Re: Personal Assets v Capital Gearing v RICA?

#174693

Postby RececaDron » October 18th, 2018, 2:00 pm

Aminatidi wrote:if you go 50/50 between PNL and 100% equities you end up with near enough a 75/25 mix.


...at present.

PNL has no fixed asset allocation so at another time they could be as much as 100% equity, and hence so would you be if you were holding a 50/50 PNL/100%-equity portfolio.

Realise that you'd be farming out half of your asset allocation to them. Nothing wrong with that if that's what you want and you think they could make better decisions than you as to when to load up, or lighten up, on equities. Is there good evidence for that?

If instead your preference is for a more fixed asset allocation like the 75/25 you mention then look at funds that provide that, or cook up your own.

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Re: Personal Assets v Capital Gearing v RICA?

#175144

Postby Aminatidi » October 20th, 2018, 8:50 am

The closest to "evidence" is their track record I guess - they have one, I certainly don't.

My preference leans more towards risk based v doggedly sticking to fixed % allocations come what may.

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Re: Personal Assets v Capital Gearing v RICA?

#175166

Postby RececaDron » October 20th, 2018, 11:32 am

Aminatidi wrote:The closest to "evidence" is their track record I guess - they have one, I certainly don't.

My preference leans more towards risk based v doggedly sticking to fixed % allocations come what may.


I seem to recall PLNL significantly lowering its equity allocation a year or two after the GFC market bottom. Google threw up this from 2010:
https://citywire.co.uk/investment-trust ... re/a425023

suggesting a reduction in equities from 80% to 50% at that time. I don't recall the equity allocation ever rising back up from this (but could be mistaken), and only recall seeing it around or lower than 50% since.

With hindsight, significantly reducing equity exposure in 2010 doesn't appear to have been a great decision.

PNL had only foresight to act on though, and presumably they had some reason: perhaps valuation, thinking the "easy" money from equities' recovery had already been made and the risk/reward balance had thus shifted for the worse, which led them to make a sell decision that'd come to have a significant opportunity cost for holders...

These people, and others in similar roles, aren't infallible, so best to calibrate your expectations accordingly. There's a bit of a leap of faith involved in trusting in their investment methodology black-boxes, warts and all.

Recency bias means PNL and its ilk may seem like a very comfortable thing to be holding during and shortly following periods when markets take a kicking, but holding may feel less agreeable when markets have been booming for several years. If you appreciate that then fair enough, but I'm sure there'll always be a stream of people in the future who'll hold lower risk and less volatile assets throughout a lengthy bull market, only to eventually ditch them for something racier once it eventually "feels safer". And we know what often happens next. Try not to be that person.


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