Low Risk Investments in the Current Climate

ttmd

Hi without wishing to stay to much, I have recently inherited some money and I don't currently know what is the best low risk option for it at the moment. Its capital I don't really want to loose.

I have had a quick look at two options- fixed term deposits and a managed credit fund. Rabobank are safe, but the returns look very stingy

http://www.rabodirect.ie/term-deposits/default.aspx

The credit funds offer better returns but I am unable to find a good one aimed at individual investors.

What advice would the posters on the board solicit?

Also what fund managers do they recommend and do they think some of the higher return fixed term deposits are safe?

Am I being too risk adverse if I am in my mid twenties?

Wudyaquit

Yup those Rabo rates look pure muck.
Ulsterbank have an account where they'll pay either 3.5% or 3.75% (can't remember which) on money new in to Ulsterbank and you can choose your own term.

WildBoots

To be brutally honest, I don't think anything can be called a low risk investment these days.

Personally, I'd buy nat gas/oil stocks (25%), physical gold (25%), agricultural land (25%) and keep the rest in cash (perhaps allocate some funds here if you don't trust the euro http://www.everbank.com/001CurrencyCDBasket.aspx )

ttmd

Wudyaquit wrote: »

Yup those Rabo rates look pure muck.
Ulsterbank have an account where they'll pay either 3.5% or 3.75% (can't remember which) on money new in to Ulsterbank and you can choose your own term.

I think you have a point there. From an initial analysis they seem to have the best deal on offer considering that the rate is quite good plus the fact they have a better credit rating than the other bank based in Ireland with the exception of Rabo (I do understand the predicaments the RBS group has been in in recent history and will delve a bit further though) . So unless anybody has any compelling evidence otherwise, I think this is the best deal on the deposit side.

RoadKillTs

Hi ttmd,

Have a read of these two links from AAM.

Regular savings

Lump sum savings

ttmd

WildBoots wrote: »

To be brutally honest, I don't think anything can be called a low risk investment these days.

Personally, I'd buy nat gas/oil stocks (25%), physical gold (25%), agricultural land (25%) and keep the rest in cash (perhaps allocate some funds here if you don't trust the euro http://www.everbank.com/001CurrencyCDBasket.aspx )

This looks much too risky for me.

The deposit rate offered in Ulster Bank is only 3.6% for the first 6 months I see, 2.6% after.

I am starting to muse that targeting going to towards a slightly higher risk investment-say targeting a return between 4 and 6% might be the best way to go.

I have a broad idea of whats on offer deposit wise, does anyone know anything of the products with a slightly higher risk out there?

Vourney

For lower risk I like
DIA Dow Jones ETF to buy anywhere 101 or below
DE John Deere buy below 58
Someone previously mentioned Gold. I have a small position in GLD etf, but it is not low risk

As far as etf's go, I think they are a good way to reduce risk
just make sure you do not buy an etn (exchange traded note) by mistake
etfs are just basically mutual funds you can trade like stocks (I'm sure most people already know that, sorry)
I've been staying away from leveraged ETF's, as in 2 to 1, 3 to 1 leveraged lately because volatility chips away at their value. Want to stay with 1 to 1 ETFs for now.

Wudyaquit

I know it's looking increasingly like there could be a bubble forming (although those that know about it scoff at the suggestion), gold does seem to make sense.
MarketOracle contributors are putting articles on there daily and even wee willy indignant, Eddie Hobbs (I know, but at least his advice tends to have some independent thought to it) is touting commodities and gold.
http://www.eddiehobbs.com/_blog/EddiesBlog

The road we’re on I’d say is obvious. That’s why I’ve been cautioning readers to prepare for inflation like we haven’t seen for three decades. Get out of variable mortgages, cash, government bonds and paper currencies and into stuff that responds to high inflation, real assets like commodities, precious metals, property and land. Choose only shares in businesses that can outrun inflation.

hmmm

If you can't afford to lose it put it in the bank. Suggestions to buy gold or agricultural land are crazy suggestions for a low risk investor. If we do get hyperinflation you'll be too busy buying ammunition to come back on here and argue.

If you want to go higher risk, personally I would buy a broad equity index (FTSE All-world for example). Whatever you do diversify, so you may want some bonds, some commodities & some property.

WildBoots

hmmm wrote: »

If you can't afford to lose it put it in the bank. Suggestions to buy gold or agricultural land are crazy suggestions for a low risk investor. If we do get hyperinflation you'll be too busy buying ammunition to come back on here and argue.

If you want to go higher risk, personally I would buy a broad equity index (FTSE All-world for example). Whatever you do diversify, so you may want some bonds, some commodities & some property.

Look at the gold price in euros, the euro is on a very slippery slope. Anyone listening to you is going to lose their shirt, sadly that will be the majority of people.

hmmm

WildBoots wrote: »

Look at the gold price in euros, the euro is on a very slippery slope. Anyone listening to you is going to lose their shirt, sadly that will be the majority of people.

In the last 10 years alone, the gold price has ranged from a low of €270 to a high of over €1000. That sort of fluctuation immediately tells me that this is not a "low risk" investment. If anything, with all the gold ramping from salesmen and its disconnect from long run average prices, I think it has all the hallmarks of a bubble.

displaced dub

under your mattress would be very low risk:D:D

RoadKillTs

I think it has all the hallmarks of a bubble.

I agree. As I said in another thread when you have your average Joe's talking about investing in anything its time to run.

ttmd

RoadKillTs wrote: »

I agree. As I said in another thread when you have your average Joe's talking about investing in anything its time to run.

+1

I have read enough over the past 3 - 4 years to know that for all the talk of gold being a good investment it bounces about quite a lot, and I feel there is a big potential for major losses.

This essay would resemble some similar sentiments to my own about gold - I just cant get my head around investing in an asset that seems to produces little economic benefit (I know there are some commercial uses but its not a debate I want to get into).

http://www.lukejohnson.org/columns-detail.php?id=202

A lot of sensible commentators I read seem to advise me otherwise, and I will admit I have some bias against it. Then again, when people like Glenn Beck advise me to buy gold, I feel its best to put my money somewhere else.

Three more questions for anyone who is reading

1. Is there a European version of these and why would they be a good/bad option for a portfolio?

http://en.wikipedia.org/wiki/United_States_Treasury_security#TIPS

2. As for funds managers - I have read a bit about PIMCO over the years and I have always liked the way the managers philopsphy about how they managed their portfolio (Mohamed A. El-Erian and Bill Gross seem like a safe pair of hands) but as far as I can see they dont do products for the individual investor - is there any similar companies in the fund management sphere that can be recommended? Or do you think some of these companies are charlatans that charge huge fees?

3. Economic outlooks - I have been trying to get a feel of the consensus, but there seems to be at least some talk that there is deflationary risks are present alongside the talk of inflation - Europe is similar to Japan in the 90s, with growth being so slow that it feels like a recession etc (Please correct me if I am wrong and these are not connected- as Lyndon Johnson said 'Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else').

http://www.economist.com/node/16274363

I am assuming that have money in low risk bonds would be good in this situation. Is this a valid view?

Thanks for the helpful comments

hmmm

ttmd wrote: »

1. Is there a European version of these and why would they be a good/bad option for a portfolio?

There is some
http://en.wikipedia.org/wiki/Inflation-indexed_bond

Personally I'm somewhat uncomfortable with them because I don't trust the inflation figures that they are based on. I'm not expert on bonds however, taken at face value they are an excellent idea.

2. As for funds managers - I have read a bit about PIMCO over the years and I have always liked the way the managers philopsphy about how they managed their portfolio (Mohamed A. El-Erian and Bill Gross seem like a safe pair of hands) but as far as I can see they dont do products for the individual investor - is there any similar companies in the fund management sphere that can be recommended? Or do you think some of these companies are charlatans that charge huge fees?

Depends whether you want indexing or active management. As far as I'm concerned Vanguard are the index investors best friend, they provide no nonsense products at very low management fees. I don't know much about active managers.

I am assuming that have money in low risk bonds would be good in this situation. Is this a valid view?

Bonds are good in a deflationary/low inflation environment. In an inflationary environment, bonds lose their value quickly. There is so much spare capacity in the world economy at the moment that I can't see inflation rising, on the other hand the central banks have smothered the world with liquidity to avert a depression and some commentators argue that has to lead to inflation. We are cursed to live in interesting times.

Wudyaquit

hmmm wrote: »

Bonds are good in a deflationary/low inflation environment. In an inflationary environment, bonds lose their value quickly. There is so much spare capacity in the world economy at the moment that I can't see inflation rising, on the other hand the central banks have smothered the world with liquidity to avert a depression and some commentators argue that has to lead to inflation. We are cursed to live in interesting times.

Agreed. Also bond prices move inversely to interest rates and they're only likely to go one direction over the medium term, although that's pure speculation.

I'm still not convinced gold's a bubble, or if it is that it hasn't a bit to run. The only way the bubble can 'burst' is if Governments and institutions start selling, and I can't think of how or why that could happen in the current climate. Silver might be a better option as it hasn't had the same run as gold, but I haven't heard anything saying why Gold should fall based on fundamentals while there are plenty of good articles out there about why it should rise.

ttmd

Wudyaquit wrote: »

Agreed. Also bond prices move inversely to interest rates and they're only likely to go one direction over the medium term, although that's pure speculation.

I'm still not convinced gold's a bubble, or if it is that it hasn't a bit to run. The only way the bubble can 'burst' is if Governments and institutions start selling, and I can't think of how or why that could happen in the current climate. Silver might be a better option as it hasn't had the same run as gold, but I haven't heard anything saying why Gold should fall based on fundamentals while there are plenty of good articles out there about why it should rise.

I can see where you are coming from.

I have to admit I never liked it and seem to suffer from a 'confirmation bias' when I see articles trashing it as a bubble which may be clouding my better judgement. The other thing is that when it has rose so much already I tend to think that its too late and I am bound to get screwed.

I will check out those vanguard products.

I can see that the inflation/deflation question is the most important conundrum i will be facing.