Short Term Investment Strategies
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- Опубліковано 27 чер 2024
- I’m old enough to remember when you could get 7% return in the bank. These days, you’re lucky to get a tenth of that. Prolonged low interest rates combined with high inflation are a grim combination, so we need to consider alternatives to keeping money in the bank to try and eke out as much return as we can.
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Chapters:
00:00 Welcome
00:29 Intro & Setup
01:40 Opportunity Cost
03:20 Fixed Term Deposits
03:55 Savings Platforms
04:59 Premium Bonds
06:30 A blended approach with ‘low-risk’ funds
08:37 Conclusion
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Your great! Loved the style😊
Great video thank you.
That lightening was hilarious 🤣🤣
Been finding your videos very useful. I'm a self employed sole trader, as such I keep a 3month emergency pot to cover sick and holiday pay, I keep 2/3 of this in Premium bonds. I also save my tax bill money monthly into an NS&I cash ISA currently on 2.4%. My money is always available for an emergency or tax bill, has an outside chance of a good return (premium bonds) and I like that the government is paying me tax free interest on the money I will be paying them 😊
Interesting video. I'm actually looking mostly at long-term investing, but am a bit scared by the current high equity valuations. When the Nikkei fell in 1991 it took three decades to recover. Since I don't think we'll be seeing another decade of QE to pump stocks back up any time soon, I'm worried the same will happen on a global scale. So some of these tips (especially the savings platforms) are also helpful for long-term investors who are just thinking about ways to de-risk part of their portfolio without taking too big an inflation hit or having to gamble on bonds in an inflationary environment.
Love your channel
Thank you! X
Great 👍 video. What are the alternatives to the vanguard 20% equity? I don’t know 🤷♂️ what to look for? Or how to identify low risk funds?
I'd really love an updated version of this now that I have the same question, only we're now in a high interest rate, high inflation rate environment. Plus, if you already have savings, it's much more likely that now you'll pay tax on your interest. I have some scope with my ISA allowance and I guess that's where I'm looking. But even a 'good' savings rate is 'losing' money vs inflation.
A video on key information documents and their risk numbers would be good 👍
Great video as always, but with the 20% equity fund and the planned interest rate hikes that will devalue bonds over the rest of this year in the UK and US, would this not drag the fund down as the net assets (mostly bonds) value drops? Or will the yield increase and new issued bonds prop the bond index portions up?
Could go either way - who knows. The bond portion is insanely broad - all kinds of bonds and all kinds of jurisdictions - so maybe it'll be OK. It's still an investment though, so should only be used for a small part of any short term money, and only if you're prepared potentially to defer whatever it is the money is to be used for, if the investment goes down.
If you have a large portfolio already, you might not worry about drawdowns as much if the expenditure is only a small fraction. You could even take out money on a margin loan or put it on a 0% spending card to avoid capital gains or selling when the market is largely down.
For people without a large portfolio to rely upon then of-course low risk is important if spending cannot be deferred.
Exactly.
The time now is ripe to look at funds that invest in value stocks rather than popular known names which are often overvalued and run the risk of correction.
Great video Pete. Do you have any videos for what the best things someone in their 20's can do financially, or what you wish you did financially earlier on in life?
Not sure I have anything specifically for that, but I did do a podcast season on millennial finances. this is the first: ua-cam.com/video/fMQkbk8P-Pg/v-deo.html
Hi Pete, would you say more bonds than equity or even purely global bond fund be better if I'm 4 months off retirement and for my drawdown than a 20/80 fund?
Sorry, lrac111, that’s too specific a question for here. If I attempt to answer it I might end up straying over the line into advice, which I may not do. But I think that if you’re four months away and if you’re planning a cash event like taking tax-feee cash from pension, or annuitising etc, then I’d be holding the money risk-feee in cash.
This sounds a bit like having the money to pay for a new boiler for example but using a 0% credit card to pay for it and only paying the minimum for a set number of months whilst saving the majority of the money in either one of those choices you mentioned in the video
I may have to try this.
Pete, do you have any videos on options for making a regular income from investments? things like REITS?
Not yet, @Scientifik, but watch this space...
Nice video. What about notice accounts? Worth considering?
Yeah, maybe. Better than risking short term money on the markets. Rates still dire though, relative to inflation
I like your Jacket,where I can get one like it?
How did you pick the 20% equity fund was it based on its KID number?
KIID risk number, do you mean? Be careful how much you read into those. I know you've asked for a video on them, Henry so I'll bear that in mind. To answer your question though, I would pick a fund from the Mixed Investment 0-35% Equity sector. I did a podcast and have some resources here: meaningfulmoney.tv/2017/01/18/how-to-choose-a-multi-asset-fund/
I voted for this topic so thanks for covering it. I'm retired with the aim of an outright purchase of a property within 5 years. I have a mixture of cash in premium bonds and building societies, but the majority has been held for a year or so in cash from cashed-in investments still within a S&S ISA returning a painful zero, while all my non cashed-in investments romp ahead. Your comment on a low-volatile high-bond mixed investment looks appealing for some of this segment, thanks. If only I had a crystal ball 2 years ago! By the way, I notice that some platforms actually charge their normal fees on the cash component as well as on investments within an ISA. A double whammy of fees plus loss from inflation for people holding cash temporarily.
Really interesting - but more importantly, where did you get that blue cord shirt? - I want one - Cheers - Peter.
Ha - never thought I’d become a fashion icon! It’s from White Stuff, I believe
Not for everyone but I like an offset mortgage. You essentially earn your mortgage rate back. Great for an emergency fund. Also if you have to hold tax through the year.
Totally agree - not enough of these around
can you advise me on where to put the money for a house sale and can i avoid paying tax on it as i'm a non tax payer. it would be short term i hope. i need easy access to it if and when i need it again.
thanks for any help..
Sorry but I can’t give advice on this channel. But, if it’s short-term it should be held in cash, in a bank or building society account. Don’t take any investment risk. Also, the first £1000 of interest is tax-free.
My situation is, I am moving in with my partner then selling my current house.
I am hoping to have around £120k profit I then want to invest.
I want to drip feed it into an isa.
This will take 6 years at £20k/year.
What holding media would you best recommend from which to transfer to the isa.
Savings account?
Investments?
Bonds?
I am obvious prepared to except some risk as I am investing in a stocks and shares isa so should I just open a general investment account working parallel
Or go for a 3 pronged approach with an added savings account !
Thanks for such a helpful video. I’ve been trying to help my retired parents find a low risk way of looking after their money other than leaving it in a current account.
Glad it was useful, Nick!
The current Account might be the wisest thing to do right now considering the market and political/economic landscape. especially if they need the money soon.
Good video Pete. The dilemma with house deposit is real, especially when, like myself, you don't know exactly when you are likely to be purchasing said house, and with house prices skyrocketing. I have used a blend of Vanguard 20%, a few property funds to try and offset the rising prices and some cash.
Sounds like a well-thought-through plan, Ben! 👍🏻
@Ben when you say property funds, do you mean REITS?
Good short term investment strategies don't exist. At least none that give a good risk adjusted expected return.
I'm inclined to agree with you, Dan.
What's your opinion on money market funds? I believe vanguard has one available
They’re an option I guess, but it is still an investment and generally the returns are barely justified when you factor in the fees, even at Vanguard levels
Raisin "Currant Account:"
See what they did there?!
Nice video informative. But it doesn't really answer the question of short term investments because the options you mentioned are low return. I guess anyone watching this should seek a financial advisor immediately. Otherwise just spend the money on pizza or whatever.
High return and short-term means only one thing: high risk, akin to betting. I’d never recommend that
@@MeaningfulMoney I hear you. I'm not advocating betting. But saving for 10 years at those rates seem like a waste of time. There's better things to do with money I think. The video is informative though. Well done and thank you for making it.
i like to build flexibility into my life and hence my "cash events" so i can keep invested. e.g. i should replace my car in about 2 years but i'm happy to wait another few years if the markets are down. before i bought a house i was not obsessed with it. i did not set a date, i just kept that deposit money invested and struck when the right moment arrived. by being flexible you get the most out of your money.
I think that’s a very smart and mature way to look at things, Lee. Thanks for commenting!
I don't know who needs to hear this but stop saving all your money. Invest some of it if you want financial freedom..
I also trade with Mr Charles Schwab, and i must say he makes money making seem a whole lot easier right now I'm a single parent and i pay the bills comfortably since i met Charles Schwab, he's absolutely amazing and I'd recommend him for any novice in crypto.
As always, fantastic stuff. Thank you.
You’re very welcome John Boy - cheers!
I have been doing a similar kind of thing recently across the 3 main points covered so this video is reassuring that I am on the right path in terms of my thinking. Keep up the good work Pete 😀👍🏻
Thanks Matt!
Bostin good common sense advice as always. Thanks for doing these videos.
Cheers Nick - very kind!
Would keeping some short term funds in stable coins to gain ~8-10% APY be a good idea?
Nothing stable offers those returns. Crypto is still volatile, and the jury’s out for me on stable coins generally. So I wouldn’t do this with money I couldn’t afford to lose 100% of…
I feel very overweight in cash, I think I will invest some of it as I’m not desperate for any of the things it is earmarked for and I’ll keep a hefty emergency fund that I can use if markets are down when I do need it
Think through your situation, make a decision, stick to it and own the consequences. Sounds to me like your thought processes are spot on
In all your years in working in financial services have you ever heard of someone winning a good amount of money in premium bond’s? Or just what has been the largest amount you’ve heard?
Also do you think building societies are better than traditional banks and if so why are they? That could be a future video idea perhaps
Hi Kevin. Only had one client win £5000, the month after putting in £50k! The rest are just £25s and £50s. I really don’t think there’s any material difference between banks and BSs these days.
Great video, thanks. Not sure how the UA-cam algorithm got me onto your channel (i'm based in Australia and dont recall searching for investment videos), but it's been really inciteful and I'm hooked :)
Just a thought. On the proviso that you are investing in relatively low risk (inherently less volatile), in the off chance that your investment may be down when you need your money out, could you hold that money for a little longer and use your emergency fund. Then, when your investment rebounds, you can take out your investment and replenish your emergency funds.
Obviously, depending on how much of your emergency fund you depleat, the added risk would be that you need your emergency fund between the time you spent it and your investment rebounds. But that's what Credit Cards are for, right?! Just kidding
I think your logic is sound, Nathan. And that’s what adults do, right? If they want something but it isn’t the best time to pull money out and pay for it, then just defer it for six months or a year.
£50000 in premium bonds averages 0.9% from the prizes
No it doesn’t. Average luck gives nothing. Some are luckier than others. And as all bonds have an equal chance of winning, then yes, you’d have 50,000 times better odds of winning than if you only had one bond! But still, 0.9 is high. That might be YOUR average but it isn’t THE average across all bond holders.
I’m very happy to be corrected if you have a link that proves your contention? Thanks for commenting!
@@MeaningfulMoney not the most infallible source but MSE quotes each individual bond has a chance of winning any prize at around 1 in 35000. So £50k would win 1 or 2 prizes a month on average if that is to be believed.
I don't think the data has been collated and published but there was a thread on mse forum where people state their holding and prize wins each month as well as ytd % returns and from that it seemed the closer you were to max holding the closer you came to stated yield apart from those who had big wins (above £500 on single prize).
Always abit tricky as I don't think NS&I publish that sort of data apart from the fact that the algorithm gets audited to check there is no bias.
A bit of analysis on premium bonds by Martin Lewis for what it's worth:
ua-cam.com/video/yoqMJeBZUx0/v-deo.html
The chance of a prize is 1 in 34500. I hold that amount. Based on a 25 pound prize a month gives 0.87 per cent. Some months I get nowt, some months two prizes. Any investment lower than that is probably swimming against the tide. Always assume the prize will be 25quid a time, think yourself lucky if its more.
Great video, interesting approach on having a portion in low risk bonds/equity arrangement in the short term, shame with the way inflation is at the moment, that who knows what is around the corner.
Pretty poor advice to be recommending bond heavy funds in an inflationary environment. This will just lose you money. Bonds also seem to be more correlated to equity markets these days and so are pretty bad all round. Better to go for something like ishares world min volatility etf for short term. Performance comparison minv vs lifestrat20: 19mths: 10% v 0%, 12mths: 10% v -1.5%, 6thms: 0% v -4.1%, 3mth: -3.2% v -4.2%, 1mth: -1.8% v -2.6%.
Disagree. Impossible to say “this will just lose you money” - no one can know that. Firstly, investing short-term money is only an option and emphatically not a recommendation as was made clear. Then, it was only for a part of any money held for short term, and not all of it. Finally, ‘bonds’ means many things, from linkers to Gilts to high-yield to investment . Anyone investing in anything like that needs to do their homework and understand.