|Thank you Mr Market...|
However, by 'running for the hills' I am breaching my normal 'sell' rule which is intended to encourage me not to 'grab profits' - but wait until capital gains exceed five times the current income. But I think the situation is sufficiently abnormal to exercise some discretion here.
OK, we are being assured that any increase in the UK bank base rate will be slow and gradual - but the direction of travel is now clear: returns on cash will increase, thereby reducing the attractiveness of the returns from investments with fixed yields. One indicator is the Ratesetter (my favourite peer-to-peer lender) current rate for people willing to lend over 5 years: it has moved up to 6.2%. Not bad for almost risk-free lending.
My latest sale from the DIY Income Investor portfolio is Aviva's 8 3/4% Cumulative Irredeemable Preference Share (AV.A). I bought this in 2012 (just over two years ago) at 114p and it has built up a juicy 22% capital gain. It's been a nice little earner but - as I said in the introduction - I am just not sure that the price will remain so buoyant. (I sold my ordinary shares in Aviva earlier this year - only just recovering what I paid for them.)
I don't think anyone really knows what to do for the best in the current market - and I am faced with an increasing cash pile to reinvest. I'm actually looking forward to the time when the peer-to-peer lenders like Ratesetter will be eligible for ISAs and SIPPs, so that I can park some cash with them. But this may still be some time away, given how slowly the wheels of government regulation turn.
[Sale price £1.4025]
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