Share Dealing Discussion Area

xyy123 · 7 February 2010 at 1:19PM

yowza wrote: »

Thanks for the reply xyy123. I'd recently read this article at Morningstar which suggests that regular investing vs. lump sum adds to returns rather than detract from them. Though the underlying point being made may be that this is better than trying to switch in and out of the market in good or bad times.

http://www.morningstar.co.uk/uk/news/article.aspx?lang=en-GB&articleid=77967&categoryid=416

Of course it depends on the period chosen, as you point out. Perhaps the price-changes in their graph are well chosen to prove their point. I was thinking of building up a portfolio over a period of 18 months - 2 years, which in reasonable conditions (!) might cover most eventualities of the markets.

Nevertheless, the temptation must be to get fully invested as soon as possible, see what happens and change investments if necessary.

I don't think that's a very good article really. You'll notice that the value goes from '10.50' to '8'. - i.e. 20%+ fall. It rebounds pretty quickly but 20%+ corrections are pretty rare - they're usually around 10-15%. Bear markets are usually defined as 20% drops or more over 6 months or more. So the data basically assumes that not only will there be a correction over the course of your investment, but that you'll pretty much catch the bottom of it.

The fact is stock markets go up more often than they go down, hence why the FTSE index started at '100' and is now around '5000'. Bull markets generally last 3-5 years; bear markets generally last 1-2 years.

We've just had a bear market - a severe one. If you think drip-feeding the money in over a period of time, you're effectively taking the position that markets, over that period of time will have fallen on average. That's your call, but to me it seems unlikely.

Biggles · 7 February 2010 at 2:26PM

Drip-feeding is best suited to someone who doesn't have a lump sum but wants to build up an investment over a period of time and doesn't mind the extra costs involved.

If you're interested in investing for the long-term, I'd be inclined to invest your lump sum now in, as you suggest, a diversified portfolio.

prudryden · 7 February 2010 at 2:35PM

Can you afford to lose 25% of your savings? I would wait, at least, until we see how the next crisis (Sovereign debt) resolves itself.

sabretoothtigger · 7 February 2010 at 2:50PM

Im in support of scaling in for most people. Unless you are purposely aware of which prices a share will revolve around its best to get an average price when buying, it helps reduce risk and fear. Either way it still matters most that the share is worth buying in the first place.

A typical retail investor strategy is trying to buy at the very lowest price which is a fallacy unfortunately.
Much better to buy a good stock at a bad price then gamble on trying for the best price on something not sound long term anyway, that is for gamblers

[B]Monday February 08[/B] 

INTERIMS 
Kofax 

INTERIM DIVIDEND PAYMENT DATE 
BT Group 

INTERNATIONAL ECONOMIC ANNOUNCEMENTS 
Retail Sales (GER) (07:00) 
Unemployment Rate (EU) (10:00) 

GMS 
Collins Stewart 

FINALS 
Amino [URL="http://www.digitallook.com/news/sharecast/news.cgi?view=full&story=3266162&username=&ac=#"]Technologies[/URL], BATM Advanced, St. Modwen Properties, Xstrata 

FINAL DIVIDEND PAYMENT DATE 
Artemis AiM VCT 

[B]Tuesday February 09[/B] 

INTERNATIONAL ECONOMIC ANNOUNCEMENTS 
Consumer Price Index(GER) (07:00) 
Leading Indicator Index (JPN) (05:00) 
Wholesales Inventories (US) (15:00) 

Q3 
British Land Co 

Q4 
Prodesse Investment Ltd., Wolfson Microelectronics 

FINALS 
Alphameric, Prodesse Investment Ltd., Sarantel Group 'A', Sarantel Group 'B', Sperati (Ca), Wolfson Microelectronics 

EGMS 
Commercial Bank of Qatar GDR (Reg S) 

AGMS 
British Portfolio Trust, Commercial Bank of Qatar GDR (Reg S), Enegi Oil, Hardide, TUI Travel, Victrex 

TRADING ANNOUNCEMENTS 
TUI Travel, United Drug 

UK ECONOMIC ANNOUNCEMENTS 
Balance of Trade (09:30) 
BRC Sales Monitor (11:00) 

FINAL DIVIDEND PAYMENT DATE 
Asset Man Inv Trust, Dunedin Smaller Companies Inv Trust, Edinburgh Worldwide Inv Trust, SVM Global Fund 

[B]Wednesday February 10[/B] 

INTERIMS 
BHP Billiton, Hargreaves Lansdown, Morse, Pan African Resources 

INTERIM DIVIDEND PAYMENT DATE 
Halma, Spice 

INTERIM EX-DIVIDEND DATE 
City of London Investment Group, Fiske, John Swan, Murgitroyd Group, System C Healthcare 

QUARTERLY EX-DIVIDEND DATE 
GlaxoSmithKline, ING UK Real Estate Income Trust Ltd., Royal Dutch Shell 'A', Royal Dutch Shell 'B' 

INTERNATIONAL ECONOMIC ANNOUNCEMENTS 
Corporate Goods Price Index (JPN) (23:50) 
New Home Sales (AUS) (00:00) 

Q4 
CSR, Reckitt Benckiser, Smurfit Kappa Group 

FINALS 
CSR, Pacific Assets Trust, Reckitt Benckiser, Smurfit Kappa Group, Telecity Group 

IMSS 
Daily Mail and General Trust 

EGMS 
Payzone, Petropavlovsk, UK Commercial Property Trust 

AGMS 
Andor Technology, Daily Mail and General Trust, Grainger, Impax Asset Management Group, MedicX Fund Ltd., Pressure Technologies 

UK ECONOMIC ANNOUNCEMENTS 
BoE Inflation Report (09:30) 

FINAL DIVIDEND PAYMENT DATE 
Ciref, Invesco Perpetual Recovery Trust 2011 

FINAL EX-DIVIDEND DATE 
Armour Group, F&C Commercial Property Trust, ING Global Real Estate Securities, Invesco Income Growth Trust, ISIS Property Trust, Octopus Phoenix VCT, Standard Life Investments Property Income Trust Ltd., Unilever, Victrex, Zytronic 

[B]Thursday February 11[/B] 

INTERIMS 
Diageo 

INTERIM DIVIDEND PAYMENT DATE 
Workspace Group 

INTERNATIONAL ECONOMIC ANNOUNCEMENTS 
ECB Report (EU) (09:00) 
Retail Sales (US) (13:30) 
Unemployment Rate (AUS) (00:00) 

Q4 
Smith & Nephew 

FINALS 
Catlin Group, Minorplanet Systems, Rio Tinto, Rolls-Royce Group, Smith & Nephew 

IMSS 
Thomas Cook Group 

AGMS 
CustomVis, Greencore Group, Hargreave Hale AIM VCT 1, Paragon Group Of Companies, Zytronic 

TRADING ANNOUNCEMENTS 
Halma, Sports Direct International 

FINAL DIVIDEND PAYMENT DATE 
Cardiff Property, Redhall Group, Scottish Inv Trust 

[B]Friday February 12[/B] 

INTERIM DIVIDEND PAYMENT DATE 
Hampson Industries, Umeco 

QUARTERLY PAYMENT DATE 
British Land Co 

INTERNATIONAL ECONOMIC ANNOUNCEMENTS 
Consumer Confidence (JPN) (05:00) 
Gross Domestic Product (GER) (07:00) 

GMS 
First Artist Corporation, Lupus Capital 

IMSS 
Shaftesbury 

AGMS 
Central African Gold, Shaftesbury 

TRADING ANNOUNCEMENTS 
First Artist Corporation, Micro Focus International Plc 

FINAL DIVIDEND PAYMENT DATE 
Britvic, Daily Mail and General Trust, Daily Mail and General Trust 'Ord' Shares, Grainger, Hydrogen Group, JPMorgan Asian Inv Trust, Superglass Holdings

http://www.digitallook.com/news/sharecast/news.cgi?view=full&story=3266162&username=&ac=

xyy123 · 7 February 2010 at 8:05PM

prudryden wrote: »

Can you afford to lose 25% of your savings? I would wait, at least, until we see how the next crisis (Sovereign debt) resolves itself.

There's always a 'crisis' and a reason not to invest. You will rarely see a point when everyone will agree its a great time to get invested (and actually turn out to be a good time to have invested). The reason is, if everyone agrees with that, they've already bought, which means there's less people to buy and less room for prices to go up.

The two best times to buy in the last 10 years was March 09 and around March 03; sentiment was far from optimistic. The last time I remember most people agreeing it was a great time to invest was around 1999-2000, not far short of the market peak and tech bubble bursting.

Markets frequently climb a wall of worry. And its usually the problems people don't know about, or understand, that cause the problems - not the problems that are well documented and/or well understood.

sabretoothtigger · 7 February 2010 at 8:13PM

I remember reading in 1996 that the markets were overpriced, they said it every year afterwards. If I'd ignored them for a few years I could have been rich

But generally I agree if you can judge sentiment correctly and comprehensively (by the money they command, its not democracy ie. we're all paupers in this market) then its almost the most important thing.

When the apocalypse is factored into the price, buy

But regular instalments from March 03 to Oct 07 would have been awful. The market was going up pretty much the whole time.

So long as the average price is below the price you sell at it sounds almost ideal to me to have a rising price. Just set the stop loss above the average.

The trouble with regular investment is if its left to go on too long, because the new payment becomes a smaller percentage of the total amount the overall risk does increase with time

So it needs an exit strategy still, after 07 there was a few opportunities to sell or scale back out of the investment. A proper system would have negative payments, the higher it goes the less paid in and at some point money is withdrawn instead gradually

http://spreadsheets.google.com/ccc?key=0AocUWLQf7t7dcjJxdmdnX1ZPMWZhczNvcmtJT0VrQWc&hl=en

sabretoothtigger · 8 February 2010 at 2:33PM

From 0800 on Tuesday 16th February until 2100 on Monday 22nd February 2010, every time you buy international shares online, we’ll waive the usual £17.50 commission. Find out more.

buy but not sell

xyy123 · 8 February 2010 at 2:40PM

sabretoothtigger wrote: »

So long as the average price is below the price you sell at it sounds almost ideal to me to have a rising price. Just set the stop loss above the average.

Well you'll make money, sure. But if the FTSE in 2003 was say 4000, and you had 100k to invest, you'd have been better investing it at that time than steadily until 07 where the FTSE was c. 6500. The returns just wouldn't have been as good.

I don't agree with the mentality of just 'making money' in equities. If equities historically do around 10% per annum, people shouldn't really settle for 6/7% - they're taking on more risk than its worth - the premium is too high.

sabretoothtigger · 8 February 2010 at 2:51PM

7% per year for 10 years means I double my money.
Consistency is king of investing rules I think, anyone who can consistently get good returns is better then most people I'd say. Quite often aiming for higher returns is riskier and averaging would be about the opposite on both counts

FTSE 100 has been a bad index in general, so that was the real reason for any poor returns. It could be better in future, cant be sure but the last decade was about emerging country indexes

Long term since 1984 FTSE 100 has returned 3% per year excluding dividends

xyy123 · 8 February 2010 at 3:01PM

sabretoothtigger wrote: »

Long term since 1984 FTSE 100 has returned 3% per year excluding dividends

Why would you ever exclude dividends from a calculation?! Its an extra 3% a year minimum. Compounded and reinvested makes a huge difference.

Since 1984 cash deposit has returned 0% excluding interest. Its bizarre to exclude such an intrinsic constituent of the makeup of returns of an index/asset. Like taking rental yields out of the equation on commercial property.

All I meant is that someone investing in equities looking for 6% is taking the same or nearly the same level of risk as someone looking for their historical average of around 10%. So its a bit illogical.

Share Dealing Discussion Area

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free