My SIPP: Where I’m investing during times of uncertainty

Very useful - thank you I have a tiny sipp which i am hoping will provide a flip for me in 15 years time when I am 75 - so very interesting re strategy but I couldn't put 53% into cash right now - that would give me no return at all. At least with the likes of BP its not too likely to bomb and gives good dividends.

Surely if everything was certain every asset would be completely properly valued and notthing would move or change in value? So uncertainy is the natural state - no difference there then.

I think its the markets "percerption" of uncertainty that is importent, so this means that the "fear" factor at the moment is relatively high but dropping quickly due to many people having made some money in the huge rally generated by massive injections of cheap money by governments.

The big turn around factor is the how and when this will be turned off - and the problem with that is it is down to government not market forces and they tend to get it wrong.

Lets face it with cash earning 0.5% perhaps for another two years or so any half way decent dividend paying equity has got to look cheap, even in our own blighted currency (and lets face it most of us have GBP liabilities anyway so its a wash - save for the inflation it generates via imported goods e.g. petrol)

Personally I think 52% in cash is way too much and given inflation is running at about 3.7% you would be much better off in index linked govies (even National Savings!) - even though we know they are NOT cheap currently.

Yeah, nice style of article look forward to future updates.

Enjoyed the article & look foeward to future updates.Agree with Old Skool on linkers.

Some of us Sipp holders have even higher cash holdings at present - in my case 66%.

Why would I invest in high yielding shares paying 5-6% pa when the whole equity market could easily fall 20% or more at the slightest sign of bad news. Where are the positive economic (or political) factors at present ? History shows that in bad recesssions there is more than one dip.

Getting a decent rate on cash within a SIPP is not easy. The returns out of a SIPP are not good but are better. If you could return 3.5% on cash, which before tax you can outside, then within the SIPP I suspect we would all keep more cash. At the moment I keep spare cash in the Fidelity Moneybuilder and have returnd this year about 11%

Misleading heading - uncertainty exists all the time. And that's the fun of it.

We all know the questions - what are the answers? The answers are are all guesses - some better than others.

If you don't like sterling, why keep most of your assets in sterling (especially cash)?

Are there any "contrarian" elements here? (Japan, maybe).

If China is good, why not Bolton? Only asking!

You do not say when are you planning to draw lump sum / income as surely that affects the investments?

A very good honest appraisal of the investment universe. I agree with his reasoning regarding uncertainty and volatility. His spread of investments are understandable, given that the object of the exercise is to provide a pension sometime in the future. I look forward to reading subsequent articles as I feel sure I will learn a lot from them.

Good read and some helpful thoughts - Thanks - People are being pushed towards risk by such low interest rates. I took a day out last week to visit a range of banks to look at regular savings rates, cash ISA's etc. Last year I was able to get 6% from both Barclay's and A & L, double this up with matching accounts for the wife and you could get a decent return on a few thousand

This year you have no chance! Barclay's cut to 4.25% and then reduced that again to 3.25% at the start of last week - Last year for the first time ever I actually put our 'cash' ISA allocation into stocks and will probably look to do the same this year - Now if that is what myself and no doubt many others are doing then it would suggest some upward pressure in the next couple of months on equities - in particular those high yielding shares.

Many of my funds are currently sitting on 30-50% cash [always interesting to 'look under the hood'] but at some point that money is going to be put to work, the moneymarket funds are seriously depressing right now - Interested to see someone got 11% on Fidelity Moneybuilder my research seem to reflect that has been reduced to a fraction?

My great 'white hope' this year is Japan.... have said that before and been wrong but it has certainly started well, showing around 20% since the turn of the year but I suspect the high Yen price is playing a big part in that

Bob, your holdings seem to accurately reflect your personal attitude/aversion to risk and your expectations of the market in the short to medium term.

What I would comment on is the large percentage of cash you are holding that is in danger of not keeping pace with inflation.

You could consider investing some of that cash with a good fund manager in some of the strategic and/or absolute funds that are designed to make money regardless of the market. They hold a high percentage of cash to take advantage of drops and short where appropriate.

I hold zero cash in my SIPP as I've favoured funds that hold a good percentage of cash within them. I switch funds and move cash between them on a regular basis in an effort to reflect the most current economic outlook.

Have a happy and prosperous retirement!

Thanks Rob you cant beat a personal perspective and thanks very much for it.

Its easy to risk small amounts of money but large amounts made over a life time with no chance of being replaced if lost bring with them a wall of worry.

Ive invested for decades but at the moment things dont seem right ( a gut feeling) too much paper chasing too few assets.

Look forward to your next article.

Second comment from me I am afraid:

Clearly we are all afraid of a market "correction" after all stock markets climb a "wall of worry" and we are both greedy for the upside and fearfull for the downside. At the moment a lot of people are apparently sitting in cash. I don't think the stock markets look horrendously cheap at the moment, especially China and the EMs, but you know I think this upside could continue for a surprisingly long time, before we will get some sort of correction / fall.

Now think about this - lets say inflation stays at say 3% for the next five years and rates stay at 0.5% - the net impact is a loss in buying power of (roughly) 12.5%.

Now consider this - a global well diversified equity-bond based income fund (e,g, British Assets or Murray for example, but there are others) will probably produce a dividend around (say) 4% for the next five years.Let say the market goes down by 20%. Net result zero loss with the possibility of recovery and upside.

On a risk-return basis over five years, clearly I think that is a decent bet. You may well disagree, but thats what makes a market!

Now clearly if you worry about loseing money on a day to day on market to market basis you are a trader (as I used to be professionally). As a longer term investor (say for a pension in 5-10 years time) I think holding more than 50% of your assets in cash is crazy. There I have said it. No offence meant and I respect other peoples risk appeptite, but I think it needs to be said.

As I say its my view and I may well turn out to be wrong - lets wait five years and see?

I am now over 65 and using my full SIPP drawdown. But my SIPP value was dropping like a stone during 2009. As a result I decided to convert 60% of it to cash to try to preserve some of its value. In September. I put some of this money into corporate bonds and strategic bonds - but their performance was lousy as I needed to grow the fund by 30% to get back to the 2008 value. I bit the bullet an put most of the money into emerging markets and global basics. These have outperformed the bonds by miles.

But its a bumpy ride so I now check these SIPP values every day and apart from a scare about a month ago I now have almost 50% in emerging markets, 30% in Global Basics and the rest in cash until I figure out where to put that.

The result is that I have recovered more than the drawdown and the fund has grown by about 25%.

Great you might think - but I do not want to have to play poker with my entire pension savings. I want to get my hands on the whole pot so I can give some money to my children, pay off the mortgage and have a holiday. I can then sell my house and go and live in rented while my cash earns enough to live on.

When will this benighted bloody government let pensioners like me have access to our own lifetime savings rather than having to play the markets and kowtow to their absurd rules on drawdown limits. I want to go "non-dom".

Of course everyone should invest so they're comfortable with their investments at all times, but what you suggest strikes me as contradictory in places and not something that people should copy.

'Only' 25% in UK seems ok to me, but then the rationale for it: because you don't like sterling. I'm not sure what that has to do with anything - most of the FTSE100 companies are truly global companies that receive most of their income in other currencies than sterling, so that reasoning doesn't really seem to make sense to me. Neither does that you stay 50% in cash while you don't like Sterling.

In general, it appears to me that you try to predict winners and losers instead of allocating your capital in a strategic way (uncorrelated risks) so that things should turn out ok even if you're wrong on some counts. This is a bit weird in light of your 'uncertainty' theme.

On that note, it sees madness to me to allocate 0% to the Eurozone (or even the extended Euro area). The EU is not only the biggest economic bloc on this planet which hosts a whole bunch of successful global coporations, but also contains a number of high growth emerging and converging countries (Russia, Poland etc.).

There are three major fully convertable currencies in the world: USD, Euro and Yen. Not to have any exposure to one of those is, well, let's call it a high-conviction play. What it's not is a sensible long-term investment strategy.

I take it your 52% in cash is that high because you are expecting some pretty serious drops in the foreseeable future.

It is a reasonable strategy, cash in on the way up and buy on the way down.

I've never been convinced on time not timing in the market. Whilst noone can call the time exactly, it is possible to know when we've had a pretty good run and also easy to buy when prices are falling.

Makes far more sense than rigidly sticking with the time not timing mantra.

As Marc Faber has already said, 2010 is the year not to lose money rather than make it. On this basis, ignoring the derisory returns available, cash may not be a bad place to be. I manage my wife's SIPP and I currently hold circa 37% in cash.

Don't forget, from 2003 to 2007 the ftse climbed from circa 3400 to 6700, and yet by March 2009, was back down to 3500 or so. Then as now the system was being primed by Governments whose only self interest is to stay popular. Drip money into equities by all means (particularly into emerging markets and energy stocks) but stay wary, and don't listen to self interested fund managers who want you to buy their book.

I found able to identify with the article as at 67 and 3 to 4 years away from drawing down all of my SIPP I found it very insightfullll and would benefit as would many of my friends in similar circumastances to more detailed views in the future.

The issue for me in the short term (3years) is anticipating inflation and the imapact on interest rates hence what to to with short term cash.

Rob,

have you got an update for us at all? It has been 4 months since your last posting on this and I am curious as to whether you are happier to take on more risk?

Broomtree

Fidelity MoneyBuilder Income is not a Money Market cash fund! It mainly has sterling denominated fixed-interest securities.