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The foolish amongst us
CTT_2
Posts: 403 Forumite
Share boom sparks fears of soaring debt
IFAs warn novice investors against taking out personal loans or piling on credit card debt to gamble on the FTSE bull run
Soaring share prices are tempting people to remortgage or use credit cards to invest in the stock market - prompting fears of a return to the days of the technology boom when thousands of investors had their fingers burnt.
Financial advisers have been receiving calls over the past few days from would-be investors wanting to buy unit trusts and shares funded by credit cards, personal loans and equity in their homes. The advisers said the inquiries had come mainly from novice investors showing an interest because the FTSE100 index has climbed by more than 70 per cent over the past three years. Last week it rose above 5,700 - its highest level for five years.
They fear a re-run of the late 1990s when investors rushed to use credit to buy shares and equity funds to cash in on soaring technology share prices. When the tech bubble burst in March 2000, thousands of investors were left nursing big losses. Those who borrowed on credit cards or took out loans to invest were left with large debts.
Colin Rothery, the regional manager of Throgmorton Financial Services, the financial adviser, said in one case he had dissuaded an investor from borrowing £100,000 on his house to invest in shares.
"This investor is a classic example of someone who jumps on the bandwagon just as it may be running out of steam," he said. "A year ago he sold all his equities to get into property, which had been doing well, and now, having missed out on last year's surge in prices, wants to buy back in again at what may be the top of the market."
IFAs warn would-be investors not to take on debt to gamble on whether the bull run will continue. Equities would need to continue performing better, net of charges, than the interest on the loan year in, year out to make the high-risk strategy worthwhile, warn advisers.
Philippa Gee, the investment director of Torquil Clark, said she had been forced to warn clients against using cheques sent out by credit card companies offering 0 per cent introductory offers to buy equity Isas. "We are seeing an increase in novice investors in their 20s and 30s asking whether they should use their plastic to get into equities.
"This is a rerun of what happened towards the end of the tech boom. Our advice is to steer clear from this as equity markets are notoriously volatile and customers could see themselves in negative equity and paying spiralling interest if things go wrong."
Last week the Investment Management Association said it expected sales of mutual funds to private investors to top the £10 billion mark by April, the highest figure since markets peaked in 1999-2000.
But opinion on whether stock markets will continue their rise this year is divided. Royal Bank of Scotland reckons that the FTSE100 will end the year at 5,600, while ABN Amro said it would end the year at 6,200.
IFAs warn novice investors against taking out personal loans or piling on credit card debt to gamble on the FTSE bull run
Soaring share prices are tempting people to remortgage or use credit cards to invest in the stock market - prompting fears of a return to the days of the technology boom when thousands of investors had their fingers burnt.
Financial advisers have been receiving calls over the past few days from would-be investors wanting to buy unit trusts and shares funded by credit cards, personal loans and equity in their homes. The advisers said the inquiries had come mainly from novice investors showing an interest because the FTSE100 index has climbed by more than 70 per cent over the past three years. Last week it rose above 5,700 - its highest level for five years.
They fear a re-run of the late 1990s when investors rushed to use credit to buy shares and equity funds to cash in on soaring technology share prices. When the tech bubble burst in March 2000, thousands of investors were left nursing big losses. Those who borrowed on credit cards or took out loans to invest were left with large debts.
Colin Rothery, the regional manager of Throgmorton Financial Services, the financial adviser, said in one case he had dissuaded an investor from borrowing £100,000 on his house to invest in shares.
"This investor is a classic example of someone who jumps on the bandwagon just as it may be running out of steam," he said. "A year ago he sold all his equities to get into property, which had been doing well, and now, having missed out on last year's surge in prices, wants to buy back in again at what may be the top of the market."
IFAs warn would-be investors not to take on debt to gamble on whether the bull run will continue. Equities would need to continue performing better, net of charges, than the interest on the loan year in, year out to make the high-risk strategy worthwhile, warn advisers.
Philippa Gee, the investment director of Torquil Clark, said she had been forced to warn clients against using cheques sent out by credit card companies offering 0 per cent introductory offers to buy equity Isas. "We are seeing an increase in novice investors in their 20s and 30s asking whether they should use their plastic to get into equities.
"This is a rerun of what happened towards the end of the tech boom. Our advice is to steer clear from this as equity markets are notoriously volatile and customers could see themselves in negative equity and paying spiralling interest if things go wrong."
Last week the Investment Management Association said it expected sales of mutual funds to private investors to top the £10 billion mark by April, the highest figure since markets peaked in 1999-2000.
But opinion on whether stock markets will continue their rise this year is divided. Royal Bank of Scotland reckons that the FTSE100 will end the year at 5,600, while ABN Amro said it would end the year at 6,200.
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Comments
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I have deleted this post as I got my bears and bulls the wrong way round!
:snow_grin"Let it snow, let it snow, let it snow........":snow_grin0 -
Might be time for a dabble again. I did well out of Marconi when it hit 9p/share at which time I bought 2000 and sold at just over 40p.0
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Hi Folks
Shares is a bit of a hobby of mine.
The thing with shares is always do your research & ALWAYS set a stop loss BEFORE you buy the share:
ie: if you buy a share for £3.00 decide straight away that you will sell if it drops below say £2.55, (15% stop loss) that way you can afford to choose a few wrong shares & still have money left for the next one.
Best wishes
Julie0 -
What I meant to say in my previous post was that, IMVHO, the markets are about to get bearish .
What an absolute plonker. :snow_grin"Let it snow, let it snow, let it snow........":snow_grin0 -
sa1nt wrote:Hi Folks
Shares is a bit of a hobby of mine.
The thing with shares is always do your research & ALWAYS set a stop loss BEFORE you buy the share:
ie: if you buy a share for £3.00 decide straight away that you will sell if it drops below say £2.55, (15% stop loss) that way you can afford to choose a few wrong shares & still have money left for the next one.
Best wishes
Julie
I think if you buy shares then this is the only way. Ive know people lose almost everything due to their "gamble" (not saying others do, just this particular person) on the stock market.
I think its great if as said above you do your research, set a "stop loss" and have the spare money to do it to start with. Taking out loans and cc to cover shares money seems like too big a gamble to me (just my opinion).
Says she who would love, but is too scared to invest herself right now!!
Reading the thread with interest guys, x0 -
The thought of borrowing say, £1000, and investing it in the stock market only to then lose the lot, gives me the collywobbles. Borrowing an affordable amount to purchase a home is the only sort of borrowing I feel comfortable with.:snow_grin"Let it snow, let it snow, let it snow........":snow_grin0
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Indeed, But on the other hand i can see the attraction. Some shares "appear" to be such a sure bet. I wouldnt do it myself but know many people who would and have. Gives me the collywobbles too thinking about it now!!0
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I think it's desperation or greed on the part of some people. Or maybe a complete lack of understanding of the risks involved. Or maybe both!! It ain't for me and that's for sure. Mind you, I must admit to buying the odd scratchcard in the hopes of a few quid
It is very easy to get drawn in by hype.
Sort of related, but not quite.....many years ago we had an office sweepstake thing for the Derby. Well, what we actually did was we were all allocated a horse and put a fiver on it (we sent a male colleague to the local betting shop!) My horse won and I think I won about £35. I was over the moon and the thought came into my head that that had been a very easy way to earn £35. I was almost tempted, just for a split second, to try and make a living from it until my sensible side took command! I honestly can see why people get hooked on it. But like many addictions it is a dangerous road to go down.
Oh, dear, seem to have digressed!:snow_grin"Let it snow, let it snow, let it snow........":snow_grin0 -
My boyfriend got sucked in by something very similar in the early 90's with the dotcom boom. Ended up £40k in debt (or should I say, that's how much it was by the time his house sale enabled him to pay it off - I don't even know what it was originally!) I just think it's highly risky to gamble with anybody's cash other than your own.
Operation Get in Shape
MURPHY'S NO MORE PIES CLUB MEMBER #1240 -
And really thats what it is. Its a form of Gambling. Even for proffesionals who study the market, trends, fads ect. Its not really any different from studying what makes one horse better than another, which lotto numbers come out more often ect. Some people to very well, some people dont. Educated Gambling
Maybe im being niave (sp) and sorry if thats offensive. Just my lickle opinion!0
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