The most discussed dinner party topic is all wrong

February 5, 2015 Categories: Markets, Miscellaneous

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My girlfriend is selling her house. She hasn’t been living in it because it’s up North and she works in London. She’s been letting it out but now she wants to live in her own place in London. She is tired of noisy flatmates and derelict landlords.

Like everybody we discussed ad nauseam how much more space you get outside London, dealing with estate agents, prospective buyers, being gazumped… But her biggest concern is relative prices. “What if Manchester prices fall and London rise?” she asked, “even if Manchester goes up I’ll be worse off if London rises by more!” I said London down and Manchester down by more was also bad. I got the usual complaint about boyfriend actuaries: “Always accurate and complete but no empathy… and stop mocking my accent – you’re French!”

Now, as a trustee of a defined benefit scheme, you are deluged with details on what you own, but are you clear on what you plan to buy?

Industry jargon of end-game, self-sufficient strategy and (my own personal favourite) the post-retirement discount rate of Gilts plus a half does not really help you. Experts make soporific attempts at raising your risk awareness with acronyms such as LDI, PV01, IE01 and VaR. That last one somehow needs a lower case in the middle. It’s not rocket science, so why does it feel like it?

You plan to buy something though. I predict in 20 years* most your assets, nay, all your assets will be in that something. What is it?

(Hint: it’s not a house)

* Always make very long term predictions. Few people will be around to remember.

Yves Josseaume – Director, Client Strategy and Research

Russell Investments Wire - Yves Josseaume

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