Gut-busting inflation

Sapphire

jimjames wrote: »

What surprises me is the number of people who are unhappy with savings rates but are unwilling to consider any other options such as stock market funds.

Here we go again. :cool: Investing in the stock market is not advisable for pensioners, or those who are near to retirement. It is a form of gambling, whereby these people could lose capital and not be able to regain it.

[Deleted User]

Sapphire wrote: »

Here we go again. :cool: Investing in the stock market is not advisable for pensioners, or those who are near to retirement. It is a form of gambling, whereby these people could lose capital and not be able to regain it.

It's a form of gambling when you're young too. You're always advised not to invest anything that you're not prepared to loose. The only time that investments would look like a viable option to me would be if there was a huge chasm between what I had and where I wanted to be. Then it might be worth risking what I have in the hope of having much more. But if at all possible I'd rather downsize my expectations or get a better paid job.

People seem to think that investments can't go wrong if you have plenty of time. But that's simply not true. If your investment doesn't come with a guarantee then you could loose the lot and have no recourse. Lets face it, nowadays most savers won't put more than 50k in a single institution in case the bank goes down the tubes. A few years ago no one would have thought that could happen. Nowadays whole countries are going bankrupt and large, long-established businesses are closing down. When an investment is described as low to moderate risk it doesn't mean that you can't loose as much money. It means you probably won't loose as much money. But you're still risking the lot.

jimjames

Deleted_User wrote: »

It's a form of gambling when you're young too. You're always advised not to invest anything that you're not prepared to loose.

People seem to think that investments can't go wrong if you have plenty of time. But that's simply not true. Nowadays whole countries are going bankrupt and large, long-established businesses are closing down. When an investment is described as low to moderate risk it doesn't mean that you can't loose as much money. It means you probably won't loose as much money. But you're still risking the lot.

Like I said its all down to personal views and what you are prepared to risk but age is certainly a factor to consider. In the last 10 years we have been through 2 of the largest stock market crashes in living memory yet now the FTSE Index has virtually recovered where it was 3 years ago having been through one of the worst recessions since 1930s.

Part of the problem is the news that says when the market has dropped 40% but not that it has risen 100%. Even with the worst point from peak to trough the drop was 40%, a big drop but hardly losing "the lot".

I'd say the lottery or the 2.15 at Aintree was gambling. Putting money in the 100 biggest companies in the country has a much bigger chance of getting money back - a lot better than 14 million to 1!. There is also a huge difference between putting all your money in shares and having a proportion that is at risk but could also perform better. Based on current retirement age and life expectancy I would also suggest there is a case for even pensioners having part of their savings in shares.

[Deleted User]

jimjames wrote: »

Like I said its all down to personal views and what you are prepared to risk but age is certainly a factor to consider. In the last 10 years we have been through 2 of the largest stock market crashes in living memory yet now the FTSE Index has virtually recovered where it was 3 years ago having been through one of the worst recessions since 1930s.

Part of the problem is the news that says when the market has dropped 40% but not that it has risen 100%. Even with the worst point from peak to trough the drop was 40%, a big drop but hardly losing "the lot".

I'd say the lottery or the 2.15 at Aintree was gambling. Putting money in the 100 biggest companies in the country has a much bigger chance of getting money back - a lot better than 14 million to 1!. There is also a huge difference between putting all your money in shares and having a proportion that is at risk but could also perform better. Based on current retirement age and life expectancy I would also suggest there is a case for even pensioners having part of their savings in shares.

Show me one gambler that doesn't think he's onto a sure thing! LOL

Loughton_Monkey

Sapphire wrote: »

Here we go again. :cool: Investing in the stock market is not advisable for pensioners, or those who are near to retirement. It is a form of gambling, whereby these people could lose capital and not be able to regain it.

This statement entirely blows the whole concept of Flexible Drawdown as now allowed by the Government.

I am a 'pensioner' who retired at age 56, with [actuarially speaking] a life expectancy of another 30 years. What am I supposed to do? Spread my entire pile across 2.8% savings accounts? Of course not. Like any sensible person, I have 33% in Equities. It started off as about 25%, but thank God I invested in them - because they have provided real growth.

So let's rephrase it?

Someone on State Pension only, with £10K life savings probably should not invest in the Stock Market.

Someone with £35K Pension income and £500,000 savings 'might' be well advised to put a proportion into the Stock Market.

Would a retired banker on £120K a year pension, and £5 or £6 million in savings be best advised to keep it all in Nationwide Mysave and a 3 year Santander bond?

[Deleted User]

Loughton_Monkey wrote: »

This statement entirely blows the whole concept of Flexible Drawdown as now allowed by the Government.

I am a 'pensioner' who retired at age 56, with [actuarially speaking] a life expectancy of another 30 years. What am I supposed to do? Spread my entire pile across 2.8% savings accounts? Of course not. Like any sensible person, I have 33% in Equities. It started off as about 25%, but thank God I invested in them - because they have provided real growth.

So let's rephrase it?

Someone on State Pension only, with £10K life savings probably should not invest in the Stock Market.

Someone with £35K Pension income and £500,000 savings 'might' be well advised to put a proportion into the Stock Market.

Would a retired banker on £120K a year pension, and £5 or £6 million in savings be best advised to keep it all in Nationwide Mysave and a 3 year Santander bond?

I think that's reasonable. It will be a viable option for some. But Saphire was responding to the comment "What surprises me is the number of people who are unhappy with savings rates but are unwilling to consider any other options such as stock market funds."

Lets look at the example where you suggested the person 'might' be well advised to put a proportion into the stock market.

A 65 year old with a £35k pension income and £500,000 savings would almost certainly have a mortgage free home too (lets say it's worth £500,000). At age 65 they probably hope to live another 15 years. Yet they have a million pounds in assets and a £35k a year pension. They hardly need more. So why risk loosing a lot in an attempt to get more? Generally speaking you can pretty much inflation proof your savings - the good years tend to balance out the bad. They've got enough on their plates trying to figure out how to spend all that money!

Of course, all too many pensioners live frugal lives only to leave a small fortune when they die. Lots of people will strive to increase their assets until the day they die. Some want to leave money to kids.

Investments ARE risky and they always say don't invest what you aren't willing to loose. Most people aren't willing to loose anything so why would they invest if they're able to live comfortably on their savings? And if they aren't able to live comfortably on their savings then all the more reason not to risk the little they do have.

Not knocking the people that do choose to invest, but saving is a more sensible option for lots of people - even during a spell of below inflation interest rates.

jimjames

There does seem to be a general misunderstanding of risk, not just for investments but generally.

Which is the most likely - winning the lottery or dying in a car crash? The fact that so many people throw money into the lottery each week with no return but think the 1 in 14 million chance is worth a try. The 1 in 5000 risk of getting killed in a car crash doesn't deter car use despite it being statistically far more likely than winning the lottery.

Researchers in psychology like Paul Slovic and Baruch Fischhoff have found that when we have control (like when we're driving) we're less afraid, and when we don't have control (like when we're flying) we're more afraid. That probably explains why, in the first few months after the 9/11 attacks, fewer people flew and more people chose to drive. Driving, with its sense of control, feels safer. Studies at Cornell and the University of Michigan estimate that between 700 and 1,000 more people died in motor vehicle crashes from October through December of 2001 than during the same three months the year before.

Visible risk tends to be much easier for people to comprehend. 25% drop in the stock market in a few months vs 25% drop in the value of savings over 10 years due to inflation. One is very clear to see, the other is invisible and often ignored.

£100 in 1979 is now worth £25.40 as a result of inflation.

I can't go back as far as 1979 for an example share but Temple Bar investment trust has raised its dividend from 5p in 1985 to 33.5p now. Assuming a 5% yield in 1985 that means you are now getting a 33.5% yield on your original investment plus substantial capital growth. This is a trust that invests in the top UK companies so the likelihood of total loss is negligible.

Words such as total loss, gambling etc I think are designed to frighten people off some sensible investments which could be a useful cornerstone of long term savings. The risk of money in a fund investing in China is very different to one that has a cautious UK mandate. No-one says 100% of your money should be in something that has any risk attached.

Finally the risk of the Top 100 companies in the UK all going bust having a total value of £0 is on the outer extremes of probability eg nuclear disaster, asteroid hit. If it happened then having money in a bank is unlikely to offer any more comfort than having it in shares.

DiggerUK

Savings_Dave wrote: »

...........
My portfolio by end of 2010 will be divided as thus:
CASH ISA SAVINGS 40.3%
INSTANT ACCESS SAVINGS 25.1%
HIGH INTEREST CURRENT ACCOUNTS 12.8%
STOCKS & SHARES ISA - FUNDS 7.7%
INDEX LINKED SAVINGS 7.6%
PRECIOUS METALS 5.3%
REGULAR SAVER 1.1%
.........as long as I remember that they are 'long term' investments.

Was in a similar situation a few years back, originally 1 part cash ISA, 1 part NSI Index Linked, and 1 part physical gold. Now a lot heavier in gold, 80%, that may be too high for you, but you can go paper gold/miners in your S&S ISA's if you prefer.
If you buy in to gold, aim to keep your average behind the spot price with a sufficient margin in case you have concerns about dips, you will be OK.
As you know, your cash needs 4.7% net to keep up with price inflation.
Best of fortune and 'happy stacking'.

C_Mababejive

dreamypuma wrote: »

Breads gone up.

I heard the other day that there is to be a national bread strike.

Best stock up the freezer.

whatyadoinsucka

just my own viewpoint along with many others..

inflation is just something we are going to have to live with for the time being, interest rates are unlikely to move significantly anytime soon. Unemployment within the public sector should see to that.

These are unknown times and as per all investments, the past should not be an indicative for the future and all that small print
I'm with you on the people avoiding the stock market, it can only go up (using a well 'diversified' portfolio ie morrisons (food), british gas (energy), fresnillo (silver miner), iqe (technology apple supplier), NBNK Inv (new high st bank), vodafone (telecoms))

People need to fit the risk/return ratios to there own needs, If your nearing retirement do not buy gold
people go on about inflation but as somethings go up, others stay low.
Technology for example a 12 meg camera can be had for £45, 7 years ago i paid £180-£200 for a 3meg, TVs 32" flatscreen only 3 years ago where £700, now £250, air travel has also become more accessible and affordable

the west has lived a life of luxury for too long, it is time for new players to come into there own,