dealtn wrote:mc2fool wrote:But going back to the OP, honestly, what do you think he meant in the context of his post by "no risk" and "risk free to capital"?
I have no issue with the OP, a relatively infrequent poster with less than 50 posts asking if there is something better than cash, and no risk.
I find it troubling that someone with over 8,000 posts that might be interpreted as financially aware and someone from whom advice might be taken sets out a clearly wrong set of statements about Gilts - an asset class with maturities in excess of 50 years - that has recently been hugely volatile, with a label of no risk (even when held to maturity).
Now if you meant a specific subset of that asset class, and a specific limitation on the meaning of risk then you could have chosen to say so. You didn't. Instead you oversimply make a claim of no (not even low) risk to capital. That is wrong.
Let's play the ball and not get personal here, eh?
Everything anyone writes here should be, needs to be, taken in the context of the thread. It'd get extremely tedious if one had to write a treatise covering every possible interpretation, angle and variance in case someone wants pick up on some point that's not within the context.
One such point of context would be, for example, that the OP is clearly talking about short term ("at the moment"), and my initial post was within that implicit context. Should I have written "but only short term gilts, not 50 year ones"? Maybe, but yawn...
Now in regards to "a specific limitation on the meaning of risk", I have already given it in the first paragraph of my last response to you. Possibly it's just a matter of semantics, but I find it difficult to, as you seem to want to, ascribe "risk" to something that (held to maturity) does
exactly what it says on the tin, i.e. provides its cash flows as known and expected.
Can the returns of traditional gilts (indeed, as with most asset classes) be eroded by inflation? Of course, but what's that to do with
the gilt? Traditional gilts aren't designed to protect against inflation, it's not part of their job description. You can't blame the gilt when the gilt has, in fact, performed
exactly as it was designed to. Ditto for supposed "FX risk", nothing to do with the gilt. Those are exogenous risks, not of the gilt itself, which just does what it's meant to.
It's like if a young man goes into a car showroom intending to buy a two seater sports car, and the salesman tells him what it's designed to do, 0-60 in n secs, top speed, etc, but his girlfriend pipes up and says the car is risky -- 'cos it's not designed to carry them and the 3 kids they're planning (family inflation!). The "risk" isn't with the car!
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