Savings Returns beating shares

borntobefree

http://news.bbc.co.uk/2/hi/business/7584227.stm

I thought MSEers might find this articl interesting.:o

It's a savings account for me then;)

jon3001

I saw the article on TV and there were additional comments such as how international shares had done very well. She said investors should look to spread their money over various asset classes rather than have all their eggs in one basket.

Most sensible.

Savers putting their money in funds investing in UK stocks and shares would have made more money since 2000 by putting it in savings accounts instead.

Yeah - everyone knows how putting all your money in stocks in 2000 was a great idea.:rolleyes:

jon3001

Sorry - but I keep reading the article and keep thinking how cr.@p it is. Is it really representative of how real-world investors consider their investment approach?

...industry experts say that timing was key to how much money can be made.
The same calculations, but up to July 2007, would have seen shares perform comfortably ahead of cash

Timing only matters if you're going to make a withdrawal. Investors who were comfortably ahead in July 2007, got behind in Aug 2007 as the credit-crunch unfolded and were consequently concerned had taken on too much risk. If that was money they needed in the short-term then it should have been moved to less risky assets.

She suggested that people drip-feed their investments into funds to flatten out the cycle.

Yup - that's what most people do with their pension funds and ISAs. They don't usually stick all their life savings in at the height of a dot-com bubble. I'm sure these people are doing just fine.

Really - what is the point of the article? If you stick all your money into a market at an inflated peak then you'll lose out compared to cash!?

dunstonh

Article is flawed as it assumes the following:

1 - focuses only on the UK all companies sector and uses the average. (that will capture the FTSE all share trackers though)
2 - assumes you have all your money in that area (most dont as that is poor quality investing).
3 - it picks one particular timescale that was the height before the largest stockmarket crash in a generation and now just after a moderate crash. It's the reverse of picking a good timescale to show how good they can be (like if you invested a year or so later and doubled your money.
4 - 8 years is still short to medium term.
5 - the savings figures do not take into account tax (yet the unit trust figures do for basic rate taxpayers).

The top selling fund of 2000 performed at more than double the savings return.

The article plays to those with insufficient knowledge to understand investing. Anyone who thinks that you have a choice of only cash savings or stockmarket (and not all the other options in between) and/or that stockmarket is all one risk level will fall for it. Any experienced investor will just laugh at how naive the article is.

ed123_2

...I agree....don't trust the so called independent financial advisers/commission earning parisites....avoid the share/stockmarket..put your money on cash deposit.....where do all the city boys place their bonuses..............not in shares...........

Aegis

ed123 wrote: »

...I agree....don't trust the so called independent financial advisers/commission earning parisites....avoid the share/stockmarket..put your money on cash deposit.....where do all the city boys place their bonuses..............not in shares...........

I deal with a load of the city boys and their bonuses, and I can tell you that the majority of them put a fairly large chunk of their money into investments in the form of direct holdings, collective investments and occasional forays into derivatives and/or structured products. They generally aren't content to just have their entire wealth sat around in a savings account.

Of course, they don't tend to chuck it all into a UK index tracker, so they're generally doing quite well as the years go by. Diversification and selecting funds based on added value can really help with surviving little drops like we've seen lately.

opinions4u

The article is both accurate in many ways and totally flawed too. It's a bit like the funding of pension schemes in the UK. One month all is rosy in the garden, then the FTSE takes a dive and suddenly the funds are mega £billions in shortfall.

Timing is everything for an investor and you only know you have had good timing with the benefit of hindsight.

The quote in this article that truly hits home is:

"William Claxton Smith, of Insight Investments, also pointed out that over the last eight years interest rates have been relatively high in the UK, leading to better returns from savings accounts."

And I thought investment companies (e.g. the endowment firms) blamed our low interest rate environment for their pathetic returns!

Why am I not surprised that "experts" use whatever line suits when they've messed up?

baby_boomer

dunstonh wrote: »

4 - 8 years is still short to medium term.

I think most advisers in 2000 would have described 4-8 years as medium term.

Now we have a different perspective .

Paul_Herring

dunstonh wrote: »

Article is flawed as it assumes the following:

1 - focuses only on the UK all companies sector and uses the average. (that will capture the FTSE all share trackers though)
2 - assumes you have all your money in that area (most dont as that is poor quality investing).
3 - it picks one particular timescale that was the height before the largest stockmarket crash in a generation and now just after a moderate crash. It's the reverse of picking a good timescale to show how good they can be (like if you invested a year or so later and doubled your money.
4 - 8 years is still short to medium term.
5 - the savings figures do not take into account tax (yet the unit trust figures do for basic rate taxpayers).

I've been listening/reading about this since this 'statistic' broke the news and I think I can assume since they haven't been mentioned in any of them:
6 - Dividends aren't being taken into account.

thor

baby_boomer wrote: »

I think most advisers in 2000 would have described 4-8 years as medium term.

Now we have a different perspective .

In a couple of years time if the market is still performing badly we will be told that 5 to 10 years is short term. Remember when they used to give you graphs showing how investments would perform at 5%, 7% and 9 or 10%? They used to have 7 years as medium term.
In Japan I bet commission taking Investment advisers are desparately trying to convince everyone that 30 years is short term.

swiss69

There are many factors to take into account before making decisions on investing.

Tax rate is key - Cash based savings accounts for 40% taxpayers are not attractive on the whole other than ISA and index linked savings certificates. a 6% return on savings is 3.6% to a higher rate tax payer. Take real inflation off and you have a negative return on your money.

Where one market flounders another may flourish - Returns in China and India in the last 8 years would easily have beaten cash.

Differenct sectors can help diversify a portfolio - Commodity funds have performed superbly in the last 8 years.

Risk attitudes play a part. Investing in Barratt shares when they hit 40p was very risky. 6 weeks later they are sat at 1.37p so a nice 250% return on your money in 6 weeks if you were brave enough!

There are pro's and cons to cash v shares but a well diversifeid portfolio with long term aims usually pays dividends.