Investment

[Justin Passing]

Inside the ISA (or SIPP):
Look at The ETP EGAS which is European Natural Gas. Bought in August it's up 60%. Even if Hormuz opens. Qatar production is reduced, Asia is short of Oil so they're paying far higher prices for gas, and Europe has to compete for it while stores are low.
I bought a lot mid September and it dipped alarmingly but it's in profit now. Ease in gradually and use a stop-loss.
And if the weather is bitterly cold, the price increase will cheer you up.

** If bond yields rise more, the price you'd pay at that moment, or get back, would dip. So you'd plant to hold until maturity.

Outside:
Low coupon gilt TN28 bought now is going to pay 5.56% in 31/1/28 which is untaxed, plus the coupon 0.125% pa taxed

 

[Mottie]

Before the end of the tax year will give you time to park £20,000 in an ISA, and another £20,000 a week or two later.

Won't that make them one of your "tax dodgers" though John?

 

[Dec27]

Inside the ISA (or SIPP):
Look at The ETP EGAS which is European Natural Gas. Bought in August it's up 60%. Even if Hormuz opens. Qatar production is reduced, Asia is short of Oil so they're paying far higher prices for gas, and Europe has to compete for it while stores are low.
I bought a lot mid September and it dipped alarmingly but it's in profit now. Ease in gradually and use a stop-loss.
And if the weather is bitterly cold, the price increase will cheer you up.

** If bond yields rise more, the price you'd pay at that moment, or get back, would dip. So you'd plant to hold until maturity.

Outside:
Low coupon gilt TN28 bought now is going to pay 5.56% in 31/1/28 which is untaxed, plus the coupon 0.125% pa taxed

Is it still worth a punt @ that price ?

 

[motorbiking]

Close to its peak and levelling off.

 

[333rocky333]

Outside:
Low coupon gilt TN28 bought now is going to pay 5.56% in 31/1/28 which is untaxed, plus the coupon 0.125% pa taxed

Regarding bonds, where's the 5.56% come from.
Is that because you pay say 95 pound each and when they mature in about a year you get back 100 pound each, thanks

 

[Justin Passing]

Regarding bonds, where's the 5.56% come from.
Is that because you pay say 95 pound each and when they mature in about a year you get back 100 pound each, thanks

Prexactly, yes, so it varies every day. If nothing else were happening, the price would edge up in a clean /isotonic slope to 100 on maturity day.

If general interest rates were to go up, the return to Jan/28 looks less attractive, so the price goes down below the (say)95. When that happens I buy a bit more. And you would lose if you sold. Nearer the maturity date, the price gets closer and closer to the 100. It CAN go above 100 if interest rates rocket.
The Short dated bonds don't drift far but the long dated ones - 2040 or whatever - can move a lot more. Those are mostly of interest to institutions, for their complex reasons.

If you want to get confused, ask AI how the Index linked gilts work. They go up with inflation , obviously, but there are delays etc etc.
And query clean and dirty prices, and how the tax works.

 

[blup]

If you have a capital sum you can ring fence and afford to invest long term with a specialist advisers input, then yes shares are probably of sensible form of investment. But bricks and mortar achieves the same and if the market crashes you are left with bricks and mortar and somewhere to live, not a worthless piece of paper.

 

[tryingtosavemoney]

Regarding bonds, where's the 5.56% come from.
Is that because you pay say 95 pound each and when they mature in about a year you get back 100 pound each, thanks

I'm not thivk but I can never get my head around Bonds, of these types.
Do you pay tax on them, ie above the allwance?

 

[Justin Passing]

EGAS is a good illustration of Dollar Cost Averaging.
If you think it's going to go up into the winter, buy a dip, not at a peak.
It is tempting to forget that. Just buying every Tuesday (!) works.
I bought some on the red line yesterday and this morning it had dropped 2.25% which is -500 quid . Grr
So I bought some more at green.
I've bought about 20 times so the AVERAGE is off the bottom of the chart.

levelling off ? Is it? You have to zoom out

I bought most in June/July, when it was really hot and there was another Qatar hit, at half today's price. I have sold some on tops.

Oil can recover relatively quickly, but LNG supply will likely take years, It's 20% down.
If you can sell when it goes rising to flat and buy (just after a) dip, you can a) do better and b) protect yourself, but as I just demonstrated, it's easy to get that wrong.
Hence buying a bit every week or so, evens the slope out.
The important thing is "What's the Trend?", but that's a topic whch belongs in the stock market dealing thread.

 

[Justin Passing]

If you have a capital sum you can ring fence and afford to invest long term with a specialist advisers input, then yes shares are probably of sensible form of investment. But bricks and mortar achieves the same and if the market crashes you are left with bricks and mortar and somewhere to live, not a worthless piece of paper.

How many houses do you live in? Not a silly question, some use several!
House price inflation in London this last 12 months was negative.
Bricks and mortar is ok if you're renting out and have a reasonable government, and tenants.

Fair point though, you can only afford to risk the (normal) higher gains, if you have "spare money". Hence the rich get richer...

 

[Justin Passing]

I'm not thivk but I can never get my head around Bonds, of these types.
Do you pay tax on them, ie above the allwance?

No, that's the point.
With TN 28 there a "coupon" of 0.125%. That part is like any other interest, you pay income tax on it.
But the guaranteed growth on the "prinicipal" up to maturity, is a capital gain, specifically shielded, as it's treasury bond, from any tax.
If you pay taxes at 40%, that's a hell of an incentive.
Inside an ISA, they aren't particularly good, but if you have dosh floating around Outside an ISA that you just want to rely on to give you a pension, they're fine.

To be blunt it depends how much savings you have. If you inherit a house, say, they're well worth looking at.

A state pension roughly takes your tax free allowance, then you have £12,571 to £50,270 income at base rate. That would have to cover private pensions income, self employment etc.

Ignoring the small allowances etc so we're just working on the marginal rates, from April 2027, the tax rates on savings interest will increase to 22% for basic-rate taxpayers, 42% for higher-rate taxpayers, and 47% for additional-rate taxpayers.
Comparing bulding society rate at 5%, from 100k you get

5k less either , at 22% (5000 - 1100) leaving you £3900, or 3.9%
or at high rate,
5k less 42% (5000 - 2100) leaving you £2900 or 2.9%
per year,
That TN28 , 0.125% 31/1/28
gives you the taxable bit £125
which becomes
at 22% £97.50
at 42% £72.50
plus the capital gain,
That 5.56% gain was over 15 months, or 1.25 years , to Jan '28 , say it's 4.45% pa, tax free.
so
basic rate 4450 + 97.5 = £4547.5 or 4.5475%
or
high rate 4450 + 72.5 = £4522.5 or 4.5225%

I expect JohnD to check , in case I have a multiplicity of errata. Or any errata in my multiplicity.

If you're all on high rate from the inherited house or savings, say 500k earning interest, that's about 1600 difference x 5 = £8k more, per annum..
a minor complication is that you have to think about what to do when the bond matures. Loads of people have these things so the financial web pages will have advice. You can use a "bond ladder" for potentially better returns, but that's not for here.

Terminology - if you're paying 95 for the thing which comes out at 100, that's a Discount;
If you're paying 105 for it, (which can make sense) that's a Premium.

 

[motorbiking]

If you have a capital sum you can ring fence and afford to invest long term with a specialist advisers input, then yes shares are probably of sensible form of investment. But bricks and mortar achieves the same and if the market crashes you are left with bricks and mortar and somewhere to live, not a worthless piece of paper.

sorry but that isn’t true. My property investments yield half of my buy and forget stocks and the capital growth is poor. They also have poor liquidity and are subject to enhanced tax.

If it’s where you live fine as you get a benefit, but you also pay higher taxes

 

[JohnD]

I'm not thivk but I can never get my head around Bonds, of these types.
Do you pay tax on them, ie above the allwance?

I don't like bonds, but if you buy "Gilts" (debt issued by the UK government) then capital gains are free of UK capital gains tax. Not if you buy a commercial "Gilts fund." You have to buy and hold them yourself. The government promises to repay the debt at some future date, usually paying back more than they borrowed.

Some are therefore offered with a very small, negligible, interest rate, so income tax is negligible, and the capital gains is tax free.

They are attractive to people who have enough money to pay high rates of income tax

If you hold them to redemption date (which might be 5, 10, 30 years away) you get a guaranteed return. If you sell them early, you might do better or worse.

Though if you are investing for a long time, you are pretty certain to do much better invested in a broad range of equities.

 

[blup]

TanGo'd

sorry but that isn’t true. My property investments yield half of my buy and forget stocks and the capital growth is poor. They also have poor liquidity and are subject to enhanced tax.

If it’s where you live fine as you get a benefit, but you also pay higher taxes

Like JohnD’s argument about premium bonds you are undoubtedly right, but you get a much better return on a property with a low (historic) capital value than say leaving it in the bank. So invest in property and if you have any spare try the stock market would be my approach

 

[JohnD]

For a private investor, residential property may not be the best choice.

Typically, their two largest stores of wealth are their house, and their pension.

If their house is their biggest asset (it usually is) and if it is geared by a mortgage, so any rise or fall in house prices multiplies their gain or loss, investing in more residential property simply increases their concentration and risk.

A well-balanced investment portfolio will have several different sectors, preferably sufficiently unconnected that a fall in one is not certain to lead to a fall in another.

House prices have inflated during your lifetime due to insufficient being built. This may have led you to think that house prices will always keep going up, with no limit, even if it means they are so expensive that nobody can afford them. They probably won't.

Insufficient housing is not good for the nation as a whole.

In the event that the housing shortage ever gets corrected or reduced, house price inflation will reverse or reduce.

This is already happening, with remarkable effect, in countries with a preponderance of elderly population, such as Japan and China.

Britain also has a large population of older people, who own most of the houses.

Older people do not live for ever.