UK Stockmarket 2009 and beyond

gadgetmind

Ark_Welder wrote: »

Something that offers -3% real return over one year might be seen as a bit of a haven compared to something that loses 10% or 20% in two days.

Forget one year, and definitely forget two days: investments are a multi-decade thing.

Have you (or anyone else for that matter) tried to compare real returns on cash that include interest earned? After all, that is part of the return, just as dividends are on shares. People might just get a surprise.

Yes, many times, and the unsurprising result is that over any sensible term, equities thrash the pants off cash, and we're not talking "slightly better" here.

le_loup

gadgetmind wrote: »

Forget one year, and definitely forget two days: investments are a multi-decade thing.

We used to be told that a five year horizon should be maintained for investments. More recently - last few years - as volatility continued, that figure went up to ten years. Now you are saying "multi-decade".
Sounds like a game of double or quits. Statistically speaking, you may get lucky ... but it may take forever. Much longer than most people have. The constant winners, of course, are those suggesting we stay the course - fund managers, market makers, advisers ....

gadgetmind

le_loup wrote: »

We used to be told that a five year horizon should be maintained for investments. More recently - last few years - as volatility continued, that figure went up to ten years. Now you are saying "multi-decade".

I've always taken a multi-decade view. Others may not have, but that's their problem!

Sounds like a game of double or quits. Statistically speaking, you may get lucky

I'm not a gambler. The strategy of drop-feeding money into balanced assets over a long time period has been shown to work over any time period you care to examine. Contrary to popular believe, dips actually *help* this strategy as long as you're careful when it comes to the end game.

The constant winners, of course, are those suggesting we stay the course - fund managers, market makers, advisers ....

True enough.

sabretoothtigger

5 years should be enough in my view for long term factors to show up. If you cant show you advanced a project usefully over that period I would seriously doubt its profitability. Witness Government policy

Comparing gold against shares is a bit like comparing apples against shoes. Except that a shoe a day does not keep the doctor away. OK, it might if you were to smack him around the head with it. That might.

Shares are quoted as a ratio against currency so BP/Sterling but you can also get BP/Dollars quoted as well.
All I would say as a reasonable view is to consider gold might be a currency of some long term form. BP has been around a few decades so BP/Gold is just a way of viewing its value in that time. Oil was below 20 dollars 10 years ago so there is parallel in price rises I think

Gold as a currency is not a ridiculous idea, up until 1971 we had prices based around. Even after that it was still related and now two ideas are totally dislocated


I dont have access to any fancy charts for BP over 30 years but a few rough attempts :
http://i.imgur.com/IYNea.png
http://i.imgur.com/ZKVK0.png

Ark_Welder

gadgetmind wrote: »

Forget one year, and definitely forget two days: investments are a multi-decade thing.

But not everyone. Someone that is at or close to retirement and wishes to purchase an annuity would probably not want an investment in precious metals - which have fallen 10% and 20% in the the last few days.

gadgetmind wrote: »

Yes, many times, and the unsurprising result is that over any sensible term, equities thrash the pants off cash, and we're not talking "slightly better" here.

The point was that long-term returns on cash have often beaten inflation. And equities do not always outpace cash or any other asset type, which is why reliance on a single asset class ought to be avoided.

JamesU

Ark_Welder wrote: »

The point was that long-term returns on cash have often beaten inflation. And equities do not always outpace cash or any other asset type, which is why reliance on a single asset class ought to be avoided.

Table below says equities outpace cash in almost every decade. Obviously depends on precise time frame chosen for the comparison though. Disputing the importance of equity investment on this thread is heresy.

BoE cost of living adjusted to 1914, RPI inflation adjusted 1914 onwards.....


http://www.stockbrokers.barclays.co.uk/content/research/reports/specialreports/documents/Barclays%20Equity%20Gilt%20Study%202011~2011-02-18%2013_29.pdf

JamesU

gadgetmind

JamesU wrote: »

Disputing the importance of equity investment on this thread is heresy.

Hell no, if I could get the same or better results by just finding the best savings account, I'd do it like a shot! Equities are more risk, more worry and hard work.

As it happens, I do have cash in term accounts and NS&I ILSCs but this is savings and not investments.

Ark_Welder

sabretoothtigger wrote: »

Shares are quoted as a ratio against currency so BP/Sterling but you can also get BP/Dollars quoted as well.
All I would say as a reasonable view is to consider gold might be a currency of some long term form. BP has been around a few decades so BP/Gold is just a way of viewing its value in that time. Oil was below 20 dollars 10 years ago so there is parallel in price rises I think

Gold as a currency is not a ridiculous idea, up until 1971 we had prices based around. Even after that it was still related and now two ideas are totally dislocated

BP is UK listed, earns in dollars is is traded in the US, so it is reasonable to quote its price in those currencies.

Work out the value - in dollars - of all the gold that has been mined. Then work out the total of all currencies that might use gold. Total not just the notes in circulation but also electronic cash. The volume and value of gold is insignificant compared to those. Or perhaps just look at the daily turnover in Forex markets and compare that to the value of all gold that has ever been mined.

http://en.wikipedia.org/wiki/Foreign_exchange_market
http://en.wikipedia.org/wiki/Gold_reserve


Yahoo did a similar article in the last week or so, but I can't find that one. This is from a year ago. http://finance.yahoo.com/news/The-Gold-Standard-Solid-as-minyanville-2853017352.html?x=0

Ark_Welder

JamesU wrote: »

Table below says equities outpace cash in every decade. Obviously depends on precise time frame chosen for the comparison though. Disputing the importance of equity investment on this thread is heresy.

BoE cost of living adjusted to 1914, RPI inflation adjusted 1914 onwards.....



JamesU

2000-2010...?

For the record, my allocation to cash is currently running at just under 10% of assets...

I tend to not differentiate between 'savings' and 'investments'. For me, they are one and the same.

gadgetmind

Ark_Welder wrote: »

2000-2010...?

One wonders what their geographic exposure was. UK has been drab but other areas have risen *very* strongly.

For the record, my allocation to cash is currently running at just under 10% of assets...

I keep flip-flopping regards how I work this out. Clearly our primary residence doesn't get counted as an asset as we need somewhere to live, but do I then need to get an asset breakdown of my company pension, which is in a variety of managed funds? My "final" decision is to leave my two main pensions and my non-pension savings as three pots and do asset allocation separately within them. The pension into which I drip feed can be rebalanced by changing where the drips go. My other pension (currently!) a SIPP which an IFA rebalances. That just leaves my ISA and unwrapped investments, which I balance myself.

I tend to not differentiate between 'savings' and 'investments'. For me, they are one and the same.

I tend to use the different terms so as to recognise their very different sharpe ratios.