In 2024 Stuart Kirk wrote that he was aiming to double the value of his portfolio to £1mn over eight years and he now reports a cash portfolio worth £638,500.
His capital has grown impressively since, but with 20 per cent less time available to achieve the remainder of his goal, the risk of a market downturn is more significant than ever.
No wonder in his latest FT Money column he has declared that options are the only way to go (“I’m all at sea with 100% cash”, Opinion, FT Money, FT Weekend, January 10).
But if Kirk is still keen to achieve his original target by 2032 then there is an alternative strategy that will probably allow him to achieve at least 80 per cent of this target with modest risk and with a realistic possibility of achieving 100 per cent of his goal ahead of time.
Investing his £638,500 cash directly into a long-dated UK government gilt, trading at below par would generate at least £30,000 per annum. Assuming no change to the gilt price then this would deliver a total of between 80-85 per cent of his stated target by 2032.
In addition to guaranteed regular cash coupons, the gilt price itself might do some heavy lifting in achieving Kirk’s goal. While it’s possible that gilt prices might drop further, given their historical lows it’s much more likely that they will rise in the next 5-10 years.
By way of example, the UK Treasury gilt maturing in 2049 is currently trading at around £88 and has a running yield of 4.79 per cent — it was priced at more than £200 as recently as April 2020.
So if, as most people expect, UK interest rates fall significantly in the next 5-10 years, gilt prices should re-rate and this would offer the prospect of achieving the £1mn target, perhaps even ahead of Kirk’s original 2032 deadline.
With so little time left to achieve the original objective, surely managing risk is the key consideration, and so serious consideration of gilts might at this stage in the market cycle offer a different and more secure “option”.
Professor Stephen Caddick
Worthing, West Sussex, UK
