Parking cash for 6-24 months

[melonfool]

Could you buy the house you want and let it out on a 6/12m lease (fixed term tenancy) with a 6/12m extension?

Mel

[Longtermyieldman]

If your top priority is capital preservation and your timeframe short, your only options are deposit accounts and NS&I (including premium bonds). Over such a short period the risk of capital loss with equities and, worse, bonds is significant. I don't know where you got the percentage probabilities of capital loss but I would place no faith in them.

[nathan]

As a postscript, it was so close to Christmas that I parked the funds at 1.17% with Sainsbury's Bank for now, and topped up my Premium Bond holdings. Now we're in 2018, I'm still feeling uncomfortable having investments at that rate in cash, but haven't determined a sensible alternative. The comments on this thread have been very helpful, thank you. I guess I'm most inclined to be fully in the market and thus top up my Lazy ETF portfolio.

Also, note Longtermyieldman, I hadn't expressed those percentages very clearly. They weren't the probabilities of capital loss, but an approximate percentage of capital that could be expected to be lost in a downturn (statistically variance).

[hiriskpaul]

If your top priority is capital preservation and your timeframe short, your only options are deposit accounts and NS&I (including premium bonds). Over such a short period the risk of capital loss with equities and, worse, bonds is significant. I don't know where you got the percentage probabilities of capital loss but I would place no faith in them.

Don't know why you think the likelihood of a loss from bonds in the short term is higher than for equities. I would say the opposite was closer to the truth, but really depends on what bonds are chosen. Short duration GBP (or GBP hedged) investment grade is likely to have little downside or upside risk. At the other end of the spectrum, long dated sub-investment grade prices will be more closely correlated with equities.

Nathan, I suspect cash deposits/NS&I is the best bet unless you want to take on some risk with your capital with some short dated lower rated FI investments. For example, Provident Financial 8% 23/10/2019 has a yield to maturity of 9.8% at a price of 97. There is of course a risk of default if PFG spiral downwards and cannot fund the redemption, or go bust before redemption, but this is a risk I am prepared to take at the current price. If you want something less distressed, the Balfour Beatty prefs BBYB might appeal. BBYB at 114 (+ 0.5% stamp duty) has a yield to maturity on 1/7/2020 of 4.5% (3.8% if you pay tax on dividends at 7.5%, 1.3% if you pay 32.5%) and something very serious would need to happen at BBY for a default as BBY has a huge infrastructure portfolio they can utilise to fund redemption. The BBYB distributions are dividends and so attract lower tax than bond/deposit interest and if you hold to maturity, you would be able to book a 14p per share capital loss which you can use to offset gains elsewhere, or carry forward. You can of course sell either security before maturity should you want the cash early but you take the additional risk of making a net loss due to price movements and spread should you do that.

[DiamondEcho]

Be aware with premium bonds IME you don't buy them and from that day automatically enter the first draw. From when I last held some you are only entered after you have held for one full month-end>month-end period - or something similar. Similar happens when you sell out of them too.
So depending on how short-term you're considering, and if similar still applies, be aware potential returns might be eroded beyond published established average returns due to this.

[swill453]

Similar happens when you sell out of them too.

No, it doesn't.

Scott.