Investing money during the recession.

Aegis

Kua wrote: »

So, the million dollar question - How would you go about investing in gold?

You could buy a gold ETF if you wanted to.

sabretoothtigger

If you buy a gold etf and its priced in dollars and our currency strengthens then you dont get the apparent gain. How unfair

Theres a gold trust based in Canadian dollars but I dont know of brokers who deal it

The telegraph and maybe other papers print the price of a gold sovereign everyday, that might be a better guide to how this commodity moves in british pounds



If you had bought the ftse 100 every month for the last ten years you would have an average price of 5113
Excluding annual dividends of possibly 5% and also inflation devaluation over that time it would be a capital loss of about 20%

Kua

Aegis wrote: »

You could buy a gold ETF if you wanted to.

Well this seems the perfect way to go about it. But I've read that in some instances they are based on futures (something I don't yet understand) and are not neccessarily tracking the current price.

dunstonh

If you had bought the ftse 100 every month for the last ten years you would have an average price of 5113
Excluding annual dividends of possibly 5% and also inflation devaluation over that time it would be a capital loss of about 20%

The FTSE100 is an awful index and has been consistently one of the worst equity indicies to follow for the last 15 years. Its spent most of its time near the bottom of the performance tables. Its not a good index to track due to poor diversification and too heavy a weighting on too few companies.

Monthly is not a good example as early contributions dont gain from gains/losses much as value is low. The influence on the swing up or down on the value comes only in the later years (typically 8 onwards) when the value is much higher and more susceptible to say a 20% gain/loss. E.g. £1200 after one year losing 20% is just £240. £12,000 losing 20% is £2400. So, a loss of 20% in year one barely makes a blip but a loss in year 10 can cause significant pain.

sabretoothtigger

monthly_investing wrote:

Fixed units bought each month is 20% loss but fixed money and varied units means 14.7% loss over the last ten years - Ftse

Fixed units bought each month is 7% loss but fixed money and varied units means 13% loss over the last ten years - Asx
Fixed units bought each month is 32% loss but fixed money and varied units means 15.4% loss over the last ten years - Dax
Fixed units bought each month is 34% loss but fixed money and varied units means 29.3% loss over the last ten years - Dow


Fixed units bought each month is 29% gain but fixed money and varied units means 126% gain over the last ten years - Sensex
Fixed units bought each month is 28% loss but fixed money and varied units means 6.9% gain over the last ten years - HSI

I uploaded a spreadsheet to calculate returns from a monthly invest strategy for any index data given, see yahoo

http://spreadsheets.google.com/ccc?key=r2qvgg_VO1fas3orkIOEkAg

jon3001

Kua wrote: »

Well this seems the perfect way to go about it. But I've read that in some instances they are based on futures (something I don't yet understand) and are not neccessarily tracking the current price.

ETCs such as PHAU are backed by bullion held by HSBC rather than futures contracts.

If you (instead/also) want a more diversified commodities investment then a collateralised index of commodity futures is worth considering.

jon3001

dunstonh wrote: »

£100pm for 10 years after charges
L&G 100 - £3890
L&G Index - £3903
Fid Spec sits - £4217

Is this for real? A £12,000 investment losing over 65% of its value?

dunstonh

Is this for real? A £12,000 investment losing over 65% of its value?

Good spot. No its wrong. The data used the last fund change date. L&G 100 index was an 2005 launch so it shortened the term. I have reposted the figures below using HSBC 100 tracker to replace the L&G one.

£100pm for 10 years after charges
HSBC 100 - £11,514
L&G Index - £12,266
Fid Spec sits - £17,519
Gold £31,894

Gold matched the trackers for first 8 years but boomed as the recession kicked in. It now looks like a bubble waiting to burst. The rush to gold during recession usually picks prices up. As recession starts to ease and recovery kicks in you would expect gold prices to fall back. Oh for that crystal ball

So, before you get excited about gold, its probably too late to buy now and you could be buying top of a bubble. Also, for 8.5 years of the last 10, gold cumulatively underperformed Fid Spec Sits. (that fund chosen as its the top selling fund of 10 years ago so likely to the be the fund you would have been in. Its not the top performer, although it was one of the best in its sector). The trackers out performed gold until 2007 (8 years).

You have to be wary when investing not to go 100% into any one option. If it goes right you will be happy. Chances are that it will not be the best area for the whole period you invest and the odds of you picking the best area are low.

jon3001

bluey890 wrote: »

£50k.
Errmmm, 5 years, but able to get at it more quickly if required.
Medium to High Risk / Return.

Thanks.

Why would you want to 'get at it quickly'? Do you already have an emergency fund and savings in place for planned expenditure? If not, take that out of the £50K first, bank it, and concentrate on investing the rest. Requiring 'quick access' to invested money is bad because it leaves you at the mercy of the markets. Better to have some cash tucked by.

Your thread title is 'Investing money during the recession'? Could you clarify your 'investment theme'?

Are you concerned about the recession getting deeper and are looking to the limit downside? This would indicate emphasising:

• Cash (heavy preference)
• Short-term bonds (heavy preference)
• Gold (modest allocation)
• Hedge funds (modest allocation)

Or are you looking to position yourself for a recovery and take advantage of assets that would benefit? A more traditional portfolio with a heavy dose of stocks might be what you're looking for. Lots of stuff was sold off strongly in a bid to raise cash. Many markets have recovered well since the start of they year but there could still be value out there.

Key plays to emphasise might have been/could be:

• UK recovery stocks (targeting undervalued companies)
• Emerging Markets (stocks were suffering from liquidity rather than 'risk' per se during the sell off)
• Commodities (supplies are still generally tight and demand will pick-up as the world economy grows again).

Personally I don't consider myself a market-timer. Currently I have a set stategy which I'll be following for the long-run regardless of conditions. Maybe with more experience I'll make some 'tactical adjustments'.

a7man

Myrmidon_J wrote: »

Generally useful comments from 'a7man' - but not this (in my opinion).

73% exposure to equities (above), with the remainder "split in property, FI & Europe" is extremely high risk. Assuming that the 27% is divided equally across the asset classes listed, this means that just 9% of the portfolio is invested in defensive assets.

Typically, this split is associated with 'aggressive' investors with a timescale of ten years plus. I would certainly not recommend adopting such a strategy if you wish to "get at [your money] quickly if required."

I would also comment that in order to realistically consider investing in growth assets (equities, property, etc.), you would need to adopt a rolling five year timescale.

I consider this a growth spread, and fairly aggressive but also just above balanced. This is in my opinion & I understand where some people will think this is wildly aggressive.

I consider aggressive/ speculative investment portfolios to have higher percentages in foreign currencies & emerging markets and also some smaller/ new start up/ AIM companies for investment.

There are varying risk spreads within equities too, so the UK equity investments I would consider safer investments which could even be considered a defensive stance such as a fund investing in healthcare & non cyclicals etc. as well as blue chips.


The standard term quoted is 5 years, but we are in a recession, equities are cheap so if you want to take a bit of risk the reward can be huge. I believe if you invest in equities now, 5 years is more than enough time for the economy to improve.