andrew99999 wrote: ↑Sun Dec 23, 2018 9:56 pm
magneto wrote: ↑Sun Dec 23, 2018 11:20 am
UK Gov't Bonds (Gilts) are considered by some fully priced since demand seems to have outstripped supply, due to such factors as institutional obligations to match their forward liabilities.
The retail investor is under no such obligation and may look elsewhere for defensives, or use just plain old fashioned Cash.
Reducing Bond duration to seek relative stability of principal in a rising interest rate environment; unfortunately inflicts sub-inflation yields with resultant ongoing capital loss in real terms (as might Cash of course).
Note : US Bonds (deliberately currency unhedged) seem more reasonably priced and do form part of our portfolio as 'dry powder' for future international Stock purchases.
Fellow UK Investor.
I've never understood this dry powder idea.
As I understand it, basically you're waiting for the market to drop before investing. I recall a couple of threads where people both took everything out around 2014/15, and when they wrote their threads not long ago, they missed out on 40% gain so far not including dividends, so around 50%. One finally gave up realising they may never get back in and one was determined to continue waiting. It is entirely possible the price never gets back down to those levels.
I am curious what is the point of your dry powder when the stock market is so unpredictable like this?
To oversimplify; a carefully constructed liquid Well Balanced Portfolio will essentially divide in to two groups :-
+ Risk/Growth (Stocks)
+ Defensives (Bonds/Alts/Cash), the 'dry powder' ('Fixed Income' for some)
When Stocks are surging selling of Stocks can take place using proceeds to top up the 'dry powder'
When Stocks are falling buying of Stocks can take place using (for ammunition) some of the 'dry powder'.
Maybe the term 'dry powder' confuses and better to just think 'defensives'?
You will obviously not muddle with 'market timing' or momentum investing, when selling will take place on falling markets and the converse. That way lies dithering, whipsawing and mayhem.
That is quite the reverse of what a Constant Ratio or Value Investor (Variable Ratio) will be doing.
As for the all in or all out method mentioned; utter despair.