Pension fund performance - do you monitor yours, how is it doing, do you actively change it?

[danlightbulb]

You've changed argument. He's saying they'd take the 1k value as current value. You were saying you'd take the future value including the interest guaranteed.

No you're saying you take the value if you liquidate now. I.e the £900.

MKW is saying you value on an ongoing basis unless it's a firesale situation.

Most of the time its £1000 as you would value on an ongoing basis, which right now means the 10% is irrelevant

That's exactly what I've been saying the whole time. If something is guaranteed you don't value the firesale version unless you need to.

 

[Deleted User 298457]

No you're saying you take the value if you liquidate now. I.e the £900.

MKW is saying you value on an ongoing basis unless it's a firesale situation.



That's exactly what I've been saying the whole time. If something is guaranteed you don't value the firesale version unless you need to.

You've changed argument. I said personally I would value the cost if I took it now (using my Lisa example).

You said you are valuing the guaranteed return in the instance of a bond?

 

[200sols]

No dlockers gave an example of this in the real world - his LISA.

Fair enough it does exist in a LISA, although with the stipulation you already received a 25% uplift. Theoretically you could be worse off though if you saw no investment growth. LISA is just a vehicle to save really.

That's exactly what I've been saying the whole time. If something is guaranteed you don't value the firesale version unless you need to.

It's totally different though, in your example the £1000 is always £1000 and you will pay a fee if you withdraw against the rules. Bonds don't work like that, the £1000 is not always worth £1000. Fundamentally different.

 

[danlightbulb]

There's some serious misinterpretation of my arguments going on again as usual.

Let's go back a step.

You buy a bond for £100 which has a guaranteed maturity value of £105 in a year.

6 months into term, the bond could only be sold for £90.

This is irrelevant to you because you don't need to sell it. The bond is definitely worth £105 if you wait 6 months.

@Mercenary Keyboard Warrior what's the normal way of valuing this asset if you were asked to put a number on it, but the owner is intending to keep until maturity?

 

[Mercenary Keyboard Warrior]

No you're saying you take the value if you liquidate now. I.e the £900.

MKW is saying you value on an ongoing basis unless it's a firesale situation.



That's exactly what I've been saying the whole time. If something is guaranteed you don't value the firesale version unless you need to.

No your misunderstanding, the bond is different to the cash balance.

Its this :

It's totally different though, in your example the £1000 is always £1000 and you will pay a fee if you withdraw against the rules. Bonds don't work like that, the £1000 is not always worth £1000. Fundamentally different.

@danlightbulb

Say you had £1000 is cash (with 10% penalty) and a £1000 face value bond.

Your value today is the market value of both those items.
Say cash £1000 and bond £975

If you were forced to liquidate for some reason, immediately you decided to do so, your cash would be worth £900 and your bond £975.

If you went "to term", and in say a years time both happened to be able to be withdrawn and to reach maturity at the same time both would be £1000 and you would have total of £2000.

 

[booyaka]

There's some serious misinterpretation of my arguments going on again as usual.

Let's go back a step.

You buy a bond for £100 which has a guaranteed maturity value of £105 in a year.

6 months into term, the bond could only be sold for £90.

This is irrelevant to you because you don't need to sell it. The bond is definitely worth £105 if you wait 6 months.

@Mercenary Keyboard Warrior what's the normal way of valuing this asset if you were asked to put a number on it, but the owner is intending to keep until maturity?

The value is £100. It's valued at the date of the requested valuation. i.e today... It's £100

 

[Mercenary Keyboard Warrior]

@Mercenary Keyboard Warrior what's the normal way of valuing this asset if you were asked to put a number on it, but the owner is intending to keep until maturity?

Market value.

Edit just saw booyaka post above which then complicates it.

So to clarify, todays value is todays market value simple.
If you (as you can with pensions) ask for a future dated valuation then it will vary (depends on bond term) depending on specifically which date was being used.

Suggest this is vastly over complicating the scenario which will add more opportunity for misunderstanding.

 

[danlightbulb]

Market value.

So why do you not value the savings account at market value? The market value of that account today is £900 because if you liquidate today there is a penalty?

 

[booyaka]

So why do you not value the savings account at market value? The market value of that account today is £900 because if you liquidate today there is a penalty?

Not it's not... The market value is the value of the product today....

It's nothing to do with the liquidated value. If you hold £1000 in a savings account today.... it's worth £1000. That's the value.

Whether there is a 10% penalty to withdraw etc is irrelevant for the purposes of a "valuation".

 

[danlightbulb]

Not it's not... The market value is the value of the product today....

It's nothing to do with the liquidated value. If you hold £1000 in a savings account today.... it's worth £1000. That's the value.

Whether there is a 10% penalty to withdraw etc is irrelevant for the purposes of a "valuation".

But the bond value if you sell it today is the liquidated value.

 

[EvilRob]

So why do you not value the savings account at market value? The market value of that account today is £900 because if you liquidate today there is a penalty?

You're equating an asset that has decreased in value with an asset that carries a penalty for liquidation. They simply aren't the same thing on a balance sheet.
A balance sheet includes the current value of assets. If you want to include the future value of an asset, you can do a forecast.

 

[Mercenary Keyboard Warrior]

So why do you not value the savings account at market value? The market value of that account today is £900 because if you liquidate today there is a penalty?

Because as I told you already they are valued on an ongoing basis, ie nothing fundamental is going to change.
As soon as that position changes then you use the liquidation ( fire sale ) value.

 

[danlightbulb]

Because as I told you already they are valued on an ongoing basis, ie nothing fundamental is going to change.
As soon as that position changes then you use the liquidation ( fire sale ) value.

If nothing fundamental changes in the bond (i.e you stick to plan and sell it at maturity) it's worth £105.

Why are you using one rule for one thing and a different rule for another thing?

 

[Mercenary Keyboard Warrior]

If nothing fundamental changes in the bond (i.e you stick to plan and sell it at maturity) it's worth £105.

And at some point in the future it will be worth that, but today, right now, its worth market value.

You have IMO officially reached "you only get half the interest rate on regular savers accounts" point of financial illiteracy again. Well done.

 

[200sols]

If nothing fundamental changes in the bond (i.e you stick to plan and sell it at maturity) it's worth £105.

To be really picky it wouldn't be worth £105 anyway, it would be worth £100.

Just say its UK gilts, the par is £100. It wont redeem at £105 it will redeem at £100 any extra would be the coupon.

 

[danlightbulb]

And at some point in the future it will be worth that, but today, right now, its worth market value.

You have IMO officially reached "you only get half the interest rate on regular savers accounts" point of financial illiteracy again. Well done.

Oh here we go. Don't patronise me when you can't explain the logical difference between these two things.

 

[booyaka]

But the bond value if you sell it today is the liquidated value.

The point is - your not selling. You are being ask for the "current" value. the value is £100.

If you are asked for the sold/liquidated value - then that is £95/90 or whatever your example was.

The maturity value is £105...

They are all different.

 

[Mercenary Keyboard Warrior]

Oh here we go. Don't patronise me when you can't explain the logical difference between these two things.

LOL.

I have explained, as have many others.

Don't blame the teacher for not being able to turn every student into a rocket scientist. Some just aren't rocket scientist material

 

[danlightbulb]

There's no logical difference between these things.

If you put £100 in a savings account that has a fee to withdraw, you're saying its worth £100 the whole time. This is only true if you keep to the agreed term.

If you put £100 in a bond that is guaranteed to return £105, but is only tradeable for £90 at the half way point, you're saying its worth £90. If you keep to the maturity term the £90 is irrelevant.

So if you're asked to value your assets at the half way point, you either assume liquidation now or you assume you keep till maturity. If you assume you keep to maturity for the savings account, why can't you do the same for the bond?

 

[danlightbulb]

I have explained, as have many others.

Youve explained nothing. Youve said 'its this' without explaining why.