Are financial advisors getting excessively risk averse???

oldvicar

I've just had a cash deposit mature after 3 years of paying 6.95%

My 5-year 'bond' pays 7.00% with 2 more years to run.

Yes, its difficult for savers at the moment. But over the long term Cash has yielded a REAL return after inflation. Over the long term equity investment have yielded a bit more, but the past performance is no guide to the future ...

IronWolf

I think you've done the right thing dumping the first guy. Anyone scared out of the markets after a 5% drop isn't going to do you well in the long run.

Ifts

oldvicar wrote: »

I've just had a cash deposit mature after 3 years of paying 6.95%

Those were the days! Saw this article the other day, you are not alone:

Fixed-rate bond savers face 'grim shock' of 40% income crash
Read more: http://www.thisismoney.co.uk/money/saving/article-2055775/Fixed-rate-bond-savers-face-grim-shock-40-income-crash.html#ixzz1cV49KHPM

slopemaster

oldvicar wrote: »

I've just had a cash deposit mature after 3 years of paying 6.95%..

Me too.
3-yr term account with Kaupthing Edge (!) at 7%
and one with Bradford & Bingley at 6.75%

That's one of the things that precipitated the visit to the IFA.
The money is now getting 3.3% which is 2% less than inflation.

sabretoothtigger

Why would you get 'scared' when something gets cheaper to buy. If they sell double deckers for five for a pound, am I complaining. Hell no it still tastes good

Its the commodity or mining companies which tend to be all over the place full of fear because they are in turn relying on the commodity prices. Most other shares have more stable backgrounds

Alot or most of the FTSE is commodity based hence we live in a volatile market. Plus the banks and all that voodoo and its a never ending hurricane but lower prices by themselves is not bad

20 years to hold a share is being silly. Just say five and you'd be fine most of the time.
For commoditys look at average prices not todays news, gold fell a ton but over years its growing massively. Any company producing in that sector is going to do well

oldvicar

slopemaster wrote: »

Me too.
3-yr term account with Kaupthing Edge (!) at 7%
and one with Bradford & Bingley at 6.75%

That's one of the things that precipitated the visit to the IFA.
The money is now getting 3.3% which is 2% less than inflation.

Both of your deposit takers went bust or were rescued.

I must be much more cautious than you. Whilst I would not have predicted B&B's demise, I positively ignored the siren calls from Kaupthing, and withdrew all my money from Icesave 6 months before collapse.

If you were happy saving in deposits 3 years ago, what has changed to increase your appetite for risk? And why now, when the investment climate seems more dangerous?

Since you will be wondering, my deposit was with Northern Crock (after nationalisation and fully guaranteed by HM Treasury)

By the way, the 3.3% you are getting NOW, may be 2% less than inflation WAS. But if you agree with forecasts that inflation is trending down to the target 2% (which I happen not to) it looks a lot better, and higher rates are available for fixed term deposits. If you're not too fussy about who to save with there are even some RPI+x% paying accounts around just now.

Rollinghome

sabretoothtigger wrote: »

Why would you get 'scared' when something gets cheaper to buy. If they sell double deckers for five for a pound, am I complaining. Hell no it still tastes good

That metaphor, or versions of it coined by Warren Buffet, is so often used that perhaps we should be wary not to rely too heavily on it.

A chocolate bar is a consumable and presumably consumers would like to see their price continue downward forever. Stocks aren't consumables so what might suit chocolate bar buyers might not suit the buyers of stocks. Dips in between may not matter but to make sense as an investment then the investors needs to believe that what he buys will increase in value faster, or lose value more slowly, than cash or other investments.

On that basis what the price is now relative to the past is irrelevant. Whether the price is now higher or lower, of itself, is neither good nor bad. Only what happens from the point the investor buys to the point he sells really matters. Certainly he needs to be wary when there are more sellers than buyers and decide whether they are right or wrong: his assessment of the risk may be better than theirs or worse.

Similarly, the idea that when cash is giving a negative return then equities or bonds or Double Deckers must give a better return is simplistic. They may do, or the reverse could happen. The longer the period of investment the better may have much truth but not always, as those buying annuities with their funds recently have found.

If there really was a list of simple rules to success it would all be a lot easier. There aren’t, and if there were then different sets of rules would be needed for everyone dependent on their circumstances. Buy low and sell high isn’t always as simple as it sounds. We don’t know the details of the OP’s circumstances but it may have been that the original adviser believed the risk/return calculation made no sense for him and was quite right.

sabretoothtigger

Choc bars or stocks, they both involve supply and demand. Simple rules work fine if people are cautious enough to never invest 100% in one idea

the original adviser believed the risk/return calculation made no sense for him and was quite right.

]

The OP mentions living off the money which would not be investment. He needs to decide what percentage he doesnt need in the next five or ten years

That metaphor, or versions of it coined by Warren Buffet, is so often used that perhaps we should be wary not to rely too heavily on it.

Quoted often but not often used. The biggest market dynamic is people chasing success. Stocks go up, people feel more confident and buy more.
The eu bailout of greece doesnt help them really, its not improving value so why would you avoid buying now but last week chase the higher prices.
I just hope to find companies that dont rely on politics to succeed over five years and I average in

The statement is just a good reminder that price isnt value and I know price pays the bills so to the OP he is obviously focused on right now and that would be why is not an investor

Buffet isnt a small investor, he has to buy unpopular things or it'd ramp the price up immediately where as we can hang on the coat tails of big money and thats what everyone does hence bonds are in a bubble

The bigger the market the bigger the herd chasing the bubble it seems to me.

slopemaster

oldvicar wrote: »

Both of your deposit takers went bust or were rescued.
I must be much more cautious than you. Whilst I would not have predicted B&B's demise, I positively ignored the siren calls from Kaupthing, and withdrew all my money from Icesave 6 months before collapse.

I got my money into Kaupthing right at the 11th hour, when it was clear they were going under. The money that went into B&B I was actually trying to get into Kaupthing on the last day, but my bank rang me and declined to do the transfer, saying 'haven't you seen the news?'. I believed that the govt guarantee would work OK. And I didn't need the money for 3 yrs so didn't have an issue with the fact it might be inaccessible for a while. In the event, neither has caused me the slightest problem or worry.

oldvicar wrote: »

If you were happy saving in deposits 3 years ago, what has changed to increase your appetite for risk? .

I inherited some money.

JamesU

slopemaster wrote: »

Of course I'm cautious! Just don't think I'm EXceptionally cautious. I would be prepared to risk losing a small amount, say 10%, of my total capital, in exchange for the likelihood of a much better return on it. (And I think I could cope with it going up and down more than that in the short term.)

There might be a mismatch between the risks you are prepared to take and the rewards that are expected on the investments in return. Could be worth thinking about. In the last major downturn, not unusual to see 30-40% drop in "cautious managed" funds for example.

JamesU