Diary of a Dumb Investor: go for gold or ‘absolute return’?

"Absolute return" really means "multi-asset fancy-pants" so you'll find a huge variety of strategies within such vehicles. I've held Personal Assets and Ruffer for a few years, and have added the OEIC versions, which are Troy Trojan and Ruffer Total Return. I'm happy to keep holding both but doubt I'll add to my holdings as I'm currently seeing good value elsewhere.

I wouldn't be bothered with so called absolute return funds.Most have failed to deliver.Why not invest in a good income fund such as Newton Global Higher Income fund and take the divis until hard times pass.

If you need the income take it and if you don't, then re-invest them.Much better idea imho!

"absolute return" - I think you can do better than handing over the cash to these vultures. Is it still 23% after the fees?

Personally I think the majority of these just track the index very closely.

I am a gold bug, the East is still growing and as long as thats happening then the value will keep creeping up. I think it's down to a lack of options as well as a cultural thing. Lack of options in the sense that the Chinese/Indian stock exchange might as well be run by Ladbrokes. The cultural thing in that gold has traditonally held value for people of the East. The weddings, presents etc will still go on. Added to that the rest of the world's reflex reaction to jump into gold when all around them is crumbling.

Interesting that DI doesn't mention the steep price rise the day after he sold Alfren!

Blinkers on and heading for the next fence to fall at.

DI - Novice Invester using Uncle's £10K. Hmm I had thought he was in his twenties, but he now says he was at Uni in the 80's. Indeed the Spandu Ballet hit was in 1983. So if we assume he was no genius, then he was probably around 19 in 1983, which makes him 48 this year! Not so young, could the secret be out and he is in fact a Citywire journalistic/editor?

Gold is up 4x in £ in a period when outstandingly good stocks have gone sideways. Now is the time to sell gold and buy those equities. You can never sell at the top, but that level of profit on the relative trade is good enough for me.

@Redundant - I think it's pretty obvious that a) he's a journalist, b) he's no genius and c) it's not his money.

I think people need to stop being so cynical and realise that no business would surely fritter away £10,000 for a few extra comments/hits on a website. And just because the song was a hit in 1983 does not mean he went to University at that age.

On topic, holding gold would certainly help to stablise your portfolio. But i would not go to heavy into the sector. In my opinion alot of the 'smart' money is already invested. Over the next year i doubt there will be a significant increase in the value, like we saw in 2011.

I think people need to stop being so cynical and realise that no business would surely fritter away £10,000 for a few extra comments/hits on a website. And just because the song was a hit in 1983 does not mean he went to University at that time.

On topic, holding gold would certainly help to stablise your portfolio. But i would not go to heavy into the sector. In my opinion alot of the 'smart' money is already invested. Over the next year i doubt there will be a significant increase in the value, like we saw in 2011.

I think people need to stop being so cynical and realise that no business would surely fritter away £10,000 for a few extra comments/hits on a website. And just because the song was a hit in 1983 does not mean he went to University at that time.

On topic, holding gold would certainly help to stablise your portfolio. But i would not go to heavy into the sector. In my opinion alot of the 'smart' money is already invested. Over the next year i doubt there will be a significant increase in the value, like we saw in 2011.

Transfer the spare money out of your ISA and into your Fund and Share Account which Hargreaves will have kindly set up for free, without you asking for it, when you opened your ISA, then spank it all on GKP and hope for the best. If the politics in Iraq get sorted out and the oil law passed then watch if soar from the current 215p to somewhere near 1400p when one of the major oilcos buys them up. If this doesn't happen, then watch it increase over the next few months after their scheduled (and leaked) announcements. Win Win :-)

Matthew,have you been at the bottle or do you just have a very twitchy finger?

@Mathew. £10k is small beer for an organisation like Citywire, though they might have gone halves with him or come up with some other such shared equity scheme. Anyway, I'm sure they weren't expecting him to lose ALL of it.

I think it is the illuminati or the bilderberg group! bound to be

Since the Autumn, Gold has moved almost in tandem with the US stock market, and has a volatility to match. So much investor cash is parked in the asset that it has lost its "safe haven" status. Expect more volatility to come.

Re Abs Ret funds, BH has done so well partly due to being a listed Investment Trust. Demand for the shares has pushed them to a premium meaning that you can expect a loss at some point. I would be more tempted to consider Troy Trojan as its has performed virtually as well on NAV terms but does not have the additional listed volatility.

How old is DI ?? on 12th December he told us he had just turned 30. Clearly he either ages quickly or his UNI friend had a long memory for old hits. What a ditherer he is proving to be. Gold will only give him nightmares and any movement of more than 5% either way will make him wonder whether to buy or sell. The reality is that Gold will always be a speculation and not a real investment. It does not pay any return and the current price is way below the 1980's high in real terms.

Apologies, i had some sort of internet meltdown while posting the reply. I think people should just take this weekly article for what it is. An entertaining read whilst also providing a stimulating debate between the Citywire community. No need to dig any deeper...the truth would ruin the enjoyment that this read brings me!

Anthony Tinslay I agree completely. Gold is going up because it is going up definition of a bubble (Soros has already said that ‘gold is the ultimate bubble’)). Gold can be used as a diversification tool but it is very speculative at these levels and should be left to the experts who might sell out before the crash.

When asset goes up for 10 years it is deemed safe yet if you had held gold for a 100 years you would have been better putting the money into a product that has tracked the RPI. However, that is the point you can’t find a product to track the RPI and never will because the one thing that gold will not do is change it’s make-up it will always be a solid bar.

When gold stops going up and falls enough to get the ‘momentum funds selling’ it will just keep on falling. The trouble is not if it is when. It might be in one month’s time it might be in 2 years time and it might have reached $2,500 but it will crash it always does because eventually things will get better and in the US that might have started to happen. Why hold gold when you have to pay someone to hold it for you, it pays no dividends, you can’t live in it, it can’t reinvent itself or change management, it is not used in industry and is not that rare anymore. The other thing is that so many people own gold now that there is going to be so many wanting to sell all at once that it will be a blood bath. Most of the production over the last few years has been for ETF’s the very funds that can be sold or shorted at a click. Why take the risk of being the last man in!

Gold a no brainer a sell but it is when not if.

DI, your short termism will just cost you money. Just give up and put your money into something like a balanced Vanguard LifeStrategy fund.

Given your track record, I suspect you should do opposite of what you feel is right

In 1980 gold averaged $615 per ounce in 1990 it averaged $383.51, in 2000 it averaged $279.11 and in 2010 it averaged $1224.53 per ounce. So in 30 years you doubled your money and probably had a heart attack in year 2000. Gold save haven no speculation!

safe not tsave

DI wrote: "Readers appear to be divided as to the prospects for gold, which I’m now considering as a defensive investment to safeguard the remains of my battered portfolio."

Gold in my opinion is not necessarily defensive in every sense due to its volatility. While I think the price will rise significantly in 2012 buying and selling gold lends itself to the style of active trading DI has employed. Others think the price will fall especially if the dollar strengthens so the jury's out.

By contrast, the purchase of Absolute Return funds will achieve stabilisation of the portfolio which is a good move given the lamentable performance of the shares purchased to date.

DI, u have got yourself in a bit of a pickle, u can not jump from one trading idea to another, if u were learning to play golf u woud not start off by playing championship courses.

So until u have learnt to trade u need to avoid companies with problems, e.g. Lloyds bank, exotics like Etf's, commodities gold, oil etc, capital Investment Trusts, Absolute return shares etc. etc. You have been trading thru one of the most difficult periods for trading since the market reversed in 2009 so don't be put off learning. The companies u need to concentrate on are solid companies with future eps growth, not all fcasts are met so u need to know what the price it telling u. Look for shares paying a dividend with a record of an increasing dividend, once u have learnt to trade u can try to identify these companies in the main growth phases. If not general I/T's that are paying a decent divi, yielding around 4/5%, if the yield is bigger than that the market is telling u there is a problem with the trust and as you are leaning u need to avoid these situations.

Of course having traded u know how to identify a share that is trending up or down but looking at the trade in TR property I doubt this is so or u have misread the trend. Trading is mostly common sense but the market normally tries to hide it's true intentions.

Gold's run is by no means over- all commodities are in a long term bull whereas the dollar is in a long term bear. But for the immediate future- maybe 6 months at least its the deflation story- gold and silver will correct downwards and the dollar will have a short run upward. (Jim Rogers says he will buy gold again when it drops to $1200). So you should wait to buy in.

I found 'Absolute return 'Funds an absolute waste of time. Those guys that run them know virtually nothing. They'll latch on to some trade like the short euro/long dollar- but you can buy the ETF yourself. Really, I'd advise you to stay in cash rather than trust that lot (Odey, Octopus etc)

Okay folks been into most of this - Got really fed up with the famous Jupiter AR Fund, does seem to have some real balance since I sold out last year however but too pricey. Tried Baring and got out while ahead - In gold and will hold [though it has been a ride and a half] but would not put fresh money in. Newton Global was the new home for my Jupiter money and is 5.5% ahead [not counting income]. Depends what you want, if it is safety the only fund I have not sold at some point in the last four years is Ruffer Total Return, I keep adding to it now and then and the initial investment is showing 24% - great anchor fund in very uncertain times - It has a good partner fund if you want to be a bit more adventurous without too much risk in the Ruffer European 'O' Fund

Try Bet Fred or William Hill you might as well.

Its a bear market...or have you not noticed ?

Any portfolio has a place for a fund that tries to shelter cash whilst producing decent returns.

Troy Trojan is a big favourite of mine and I have 15per cent of my wife's SIPP invested in it. Lord Weinstock knows a good manager in Sebastian Lyon when he sees one. Also like Ruffer, though note that the manager recently was at pains to emphasise that low volatility isn't necessarily guaranteed.

if you want really low volatility try Miton Strategic Portfolio. If you like real eclectica try RIT Capital Partners - it is after all where the Rothschilds invest their own money. And for a trust that has a big bias towards equities but still has a decent record for limiting losses try Murray International Investment Trust. No flies on Bruce Stout.

There is no logic behind the gold price, it's just a form of speculation and trying to guess which way the other idiots (like a flock of starlings) are going to turn. This is the most dangerous type of investment.

If you'd taken my advice yesterday and bought in at 215p you'd be looking at an increase of over 25% already, currently sitting at 269p!

who says DI has invested £10,000 at all, daresay its just a virtual ploy; or is that obvious to all.

Well he does show the deals made/his current holdings on the Hargreaves system - don't see how he can fake or edit that.

The BlackRock Gold and General fund may be a better option than physical gold. Recently the value of gold has risen dramatically whilst the share price of gold miners has gone nowhere, therefore, gold miners share price should rise.

You're probably right, but there is a good deal of convincing fakery about the internet nowadays, that makes one wonder.

Gordy, these discussions have been round the house many times on Gold vs the Miners. The pricing on the miners is telling you the market doesn't believe the gold price is here to stay. Moreover with miners you get operational and hedging risks etc. If you want short term gold exposure, buy gold, not the miners.

Surely if the miners are pricing it a lot lower then what gold is currently being traded at, then this is clearly a bubble that could pop. Making it a far riskier investment then what DI seems to be currently looking for.

Remember that during the gold rush the guys who made the money were the guys selling picks and shovels whilst the miners took all of the risks and losses. Same went during the dot com frenzy in 1999. Perhaps we should be looking at the likes of Caterpillar etc. Does anyone know of a picks and shovels fund?

The Black Rock Gold and General fund is a well run fund and a good compromise. The gold price is not reflected in the share prices of miners because equity investors do not believe that gold will stay at these levels.

When oil went up during 2008 (because the dollar was falling, we were running out of oil and of course the main reason for buying any asset ‘it was going up so the graphs tell you it is a buy’)- the oil companies share prices did not go up to reflect this because equity investors did not believe oil was a raging bull commodity, rather an overpriced one. Oil crashed Sep 2008 but the oil shares did not.

Gold will crash but the miners probably won’t (they are in the market hedging gold to some extent anyway). If I am wrong on gold miners might actually do OK because they are generating lots of cash.

RL I can understand your point and agree to some extent. If the miners don't believe the price of gold will remain high, with all their knowledge, expertise and research, why would anyone go into either gold or gold mining stocks.

Sorry if the market believes the price of gold will not remain high not the miners.

@Redundant (Old Timer?)

Not sure if you have followed the article or in fact can actually read but DI said it was a hit in the 80s which reminded him of his uni days when a lad used to play it. DI never said he was at uni in the 80s or in fact 1983!

DI is 30 as it was his birthday recently - FACT!

Stop reading the artincle for the wrong reasons, some people actually learn from what DI is doing and DI does indeed write some very knowledgeable snippets. If you don't like it stop reading it.

P.S. If you did get made redundant, I'm glad.

Yours sincerely,

Adam K

DI - I await Monday's article with open arms!

Adam K, you seem the sort of person that CityWire could well do without.

Elder one - I certainly agree with you re comments by Adam K. The whole point of this continuing debate is that it can bring together many different views on the same subject. Completely opposite views are fine but there is no need for personal abuse and plain rudeness which factors merely underline what sort of person is the writer. Hopefully the Citywire monitor will review and delete - has been done before quite recently and to the extent that the person involved was no longer able to submit comments from his e mail address.

Dear me, what attitude this is worse than a chatroom - time to de-link, have a nice day folks

I have reported the comment. Let's leave it there.

And how many people give DI abuse but think that is acceptable?

Get over yourselves chaps.

I can't think of one Absolute Return fund worth investing in. To me, Absolute Return funds very rarely return a profit, no matter if the market goes up or down.

If you think that I suggest you look at this table here:

http://citywire.co.uk/money/fund-and-fund-manager-performance/-/unit-trusts/absolute-return/fund-league-table.aspx?CitywireClassID=2166&RankModelID=9

You might consider buying Tesco now!!

Hi DI, hate to keep banging on about it, (actually quite smug and far better off), but here are the figures in under 5 days if you'd taken the leap of faith on Monday:

Your £3395.93 would have bought you 1558 shares at 215p taking into account the £33.96 stamp duty and £11.95 HL commission.

Those shares are now valued at ~285p...

Value = £4486.53

Profit = £1090.6

Would have very nearly cleared all of your previous losses I believe!?

Still time to jump on board, these have a long way to go IMHO... DYOR.

Sorry amended figures below, my bad for quick arithmetic!

Value = £4440.30

Profit = £1044.37

L

France Italy and Austria suffer further downgrades with more to follow; and the EU bail out fund is under pressure as forecast in my post of last week. Is there any money left?

I'm still bullish on gold and - if you have to be in the market over the next 12 months - then Absolute Return is a good defensive place to be. Now is not the time to gamble on growth shares.

Looking at the GKP chart, I would say that the price has recently done an exponential jump. I would sell some - say, half or enough to take out my original investment. Price tend to fall faster than they rise. Good luck whatever you decide.

When you own a gold ETF, you don't own gold. You own a picture of gold. When you buy an ETF, you buy a piece of paper with the word gold on it. But you don't own gold. If you don't believe that, then go and ask for your gold you think you own. When you buy an ETF, you give your money to people who will take your money and short the very product you bought, driving it down. When you own gold, you own it. There is a simple reason lots of folks hate gold and most folks don't own gold. They don't know any better. A generation or two has been taught that paper and plastic (and now digital) are money. They are not. They are debt. The bubble is in debt, not gold. Oh, and by the way, Soros did say gold is the ultimate bubble, but the largely unreported remainder of his statement was 'it still has a long way to go before it bursts.' And he is wrong at any rate. The ultimate bubble is debt, represented by paper money and paper claims on assets. Do you seriously believe the very wealthy among us do not have a great deal of their wealth stashed away in real gold/silver/platinum? Why are Central Banks clamoring to store all the gold (and I'm sure silver and platinum) they can get their hands on if it's not wealth? Do they possibly know their paper money is doomed? Why is gold traded on currency desks and not commodity desks at financial houses? Among the gold-haters are the journalists galore who are paid by businesses that rely on stock market concerns for advertising and fiat-printing government for licensing and their very existence. You err if you trust contemporary business journalism to guide you. You profit if you do your own research and make your own decisions. Gold has been money for thousands of years, until around 1980, when the media began convincing you it was not Ask yourself why. Gold represents liberty. Paper represents debt. Gold money would have prevented all the financial heartache and crisis around today by limiting debt, because debt would have had to be backed by gold. There's plenty of gold around to back every piece of paper money in existence - it just depends on the price at which gold is valued. Gold is the money of kings. Debt is the money of slaves. Which are you and which will you be?

Chris McDaniel

So you are washed up on a desert island with nothing to eat or drink. After a few days you find a bar of gold and a box of food. Which one is the most useful to you?

ps remember that society is only three meals away from anarchy.

So, you are on this desert island, with a box of food, a bar of gold, a wad of banknotes and some share certificates. Whilst you explore you find some inhabitants with a barrel of water. Which is the best bartering tool?

Sorry but my island is uninhabited however, with a rock I might be able to bash the bar of gold into the shape of a shovel and dig for water or make a spear to go fishing with. Where did you find the notes and share certificates?

So you have found you really are on a desert island and no-one else is contactable. Good.

spotdog, stay away from Tesco for the moment, and yes it will shoot up, but this is but one warning, and these are like London buses of old, always come in convoys. I have done well out of Tesco, but I do not own any of their shares, not have I ever. I missed out a few years ago, and settled for Morrisons at the time. It has been on my watch for some time, and it is still there, and buying getting closer. It is going to take time to sort out their problems, and America is still a problem, loss maker.

Gold, yes, likely to rise, in between dives, but I doubt that DI has the fortitude or patience to cope with these.

DI has a comprehension problem, with 'long term'. Afren was a long term project as is/was Lloyds, (a rise for now but still way below there net asset value). Lloyds may drop again, but hopefully the trend is now a steady but slow up.

Afren, sold prematurely. His dealings remind me of a butterfly, flit here, flit there, BUT never in one place for long.

Donald, not forgetting a fishing line and some hooks, or maybe a fishing spear/net!

BTW, don't forget the volatility that will inevitably result from the goings on over the ditch. The worst has yet to come, IMHO.

OOPs, typos, and errant 'I' and a 'there' instead of 'their'.

Hej Snoekie,

Thanks for your advice. Unfortunately I already owned Tesco before they dropped like a stone, bought twice at 402 p and 369 p so I am sort of stuck with them. Bought just a few more at 317 p to try and get back to zero. However, I suppose if they are good enough for Warren B. then they are good enough for me, and unlike DI I am in for the long term. I am thinking, people have to eat!!

Being a very very new beginner in this business there is one thing I have learnt. That is DONT BE GREEDY. I did the best ever in 2010 where I sold every time one of my shares reached their 52 week high, or I was up over 10%. Ended the year +24%. Last year I committed one of the deadly sins, gluttony and it all ended up in minus.

Now then Snoekie let us not be too pedantic. remember this is a discussion website. Typo's are easy to do and also some people are dyslexic or posibly have other problems. Spelling is not important it appears these days and neither is mathematics as large numbers of children leave school without the basic ability to either write a letter or add up the cost of 3 grocery items without using a calculator. Some of us had a better education than others but we are all the same at birth, online and in the end .

Dennis and Donald: Interesting replies. They entice discussion. Of course, a bar of gold won't do you much good stranded on a desert island, but you are never, in your wildest dreams, going to be stranded as such. You are, in fact, now stranded in a world of governments, banks and sovereigns which cannot solve the problems of the world with bigger government, bigger banks, and bigger sovereign debt, which is their only answer to crisis. Yours, and my, governments are clearly incompetent and impotent. Rather than alone on a desert island, you will have to live among the millions of other individuals so stranded alongside you. Read history of Ancient Rome, Wiemar, the more recent history of Bosnia, Zimbabwe, the contemporary conditions in Greece, read history of inflation, read history of fiat currency, read the histories of failed governments, and you will discover just what you, and all of us, face. You might wish you were stranded on a desert island, but you will not be so fortunate. You will live among people who are hungry, angry, who feel they have little to lose and will act accordingly, who have no confidence in government or government sponsored money, and you will discover those people will be deciding for themselves, and perhaps for you, just what is valuable and what is not. If you can store enough foodstuffs, and water barrels, to survive, then you will find there are other things you will need, and that the extra stores you possess will have a value, to yourself and others. And at some point, that value will need to be denominated in a currency, since none of us can carry all the food and water barrels around on our backs. That necessary currency will be, first, gold/silver, and then, way down the road, something else when new governments again have their boot on your neck. History has shown us this time and time again and the next time will be no different. There is no credible reason to believe otherwise. Just because many of us believe we are immune to the lessons of history does not make it so. Just because many of us have lived our lives in relative peace and security does not mean such is our future. To believe otherwise, that we will escape the lessons of history, is to be pompously, even fatally, foolish. Beliefs acted upon now will later separate the survivors from the decimated. Changes will play out over a period of years, and most probably not the next few minutes, but then, actual devastating wars are ignited suddenly in seconds, after long periods of social tensions, such as we are in now, and such as always have existed. The indications are that, certainly not all, but certainly greater and greater numbers of citizens agree with me. And they are now accumulating negotiable goods and products, and gold. Gold can go as high in paper money value as governments can print paper money, and we have seen there is no end to that exercise. The printing presses are in full gear. Gold will not find it's 'bubble' popped until something else is more valuable as a widely used medium of exchange. But for a moment, let me play the 'island' game. Let me ask you: Assume you have a measure of wealth, say ten thousand pounds or dollars or euros, to lock away on a very real island (available to each and every one of us), the island of personal and secure privacy, safely and securely buried or stored or vaulted, for your personal use in a few years, or for your grandchildren to inherit in 50 years. Assume that history has taught rightfully that national borders and flags and governments and sets of laws and currencies are transitory, that they will come and go and change. Would you then store, on your personal island of privacy, that sum of wealth in the form of your own personally signed bank draft, or in the form of today's fiat money, or in the form of real gold? Which representation of wealth carries history's confidence as true wealth and which is merely the promise to pay? Which representation of wealth does your common sense tell you is certain to be considered wealth for your descendants in 50 years? Your answer certainly must tell you which is the better store of value right this minute. And your answer, I'll wager, is the same as history's answer.

How about junior gold miners? if silver is gold on steroids then junior miners are gold on nitro!

Either buy 5-10 miners at a holding of around £500 each and hold for long term (5 years+) or buy the black rock gold fund.

Hi everyone; just to confirm, I am definitely 30!

Gold in old days was a safe haven, it did not go up much and it did not go down much either (between 1800 and 1970 gold doubled in value). Yes it doubled in 170 years! Now gold is for the speculator. Gold could easily halve in value and then halve again or it could double in value.

This is due to gold going up for the last 10 years. It’s not that gold can help you create wealth or save your life. In fact a concrete block is more useful. The fact remains: if charts turn south and fund managers start off loading the gold price has the ability to crash. Soros is correct the bubble could keep going on but it will crash and so it is not a long term investment that pays you some money in the future such as a dividend, rent or a take-over premium. There is no value in gold. Since 1970 it is pure speculation!

DI - another good day for Afren today!

Chris..............You are of course right but gold was only suggested because DI has employed an active style of trading. In my view - shared by some others - is that in the short to medium term the price will rise. As a long term/passive investor my own days of gambling/investing (call it what you will) are now over. I don't buy gold or indeed mining shares but that does not stop me from recommending it.

I think gold will go down in the next 6 months and by a lot. Most people don't. In fact the best way to make money is to get the real things right and go against the speculators. Once the speculators realise they’ve got it wrong then the last man in gets a pounding. What annoys’ me is people suggesting that gold is a safe haven. I understand why people buy gold in fact all the reasons for them buying gold. But most of them are negative and based on graphs. For me it is so simple it will eventually become a supply and demand issue. Everyone will sell gold whether they want more risk or want to cover losses. What other asset as done so well that you can sell at a profit? A few months ago fund managers were selling to cover equity loses. Gold actually fell more than the stock markets.

Once gold goes negative on the graphs and the end of the world’s is not about to happen just yet why would anyone hold an investment that physically costs you money? Gold is the ultimate speculation because it cannot change itself! I just hope amateur investor don’t try and blame someone else when it does happen.

@red_dragon I know. Feeling pretty foolish right now... But how was I to know?!?

You live and learn, i think a few people here (inc me) have been positive about Afren, look at the upcomming drilling and development plans for 2012 and you could have seen plenty of reasons to hold, these are the kinds of shares that will rise in any market if the drill bit gets wet, and as you see today they have found what looks like a significant oil find (hence the 12% rise today)

The hardest thing to learn as a PI is patience, i know this myself from bitter experience.