Are financial advisors getting excessively risk averse???

slopemaster

Yes, I think I do need to think about that some more.
Though I've now worked out that I will quickly lose 20% on my savings if things carry on as they are, so now thinking in terms of 20% rather than 10%.

slopemaster

Though I would have thought that few who are after a 'cautious' investment would say they were prepared to lose 40%?

Rollinghome

sabretoothtigger wrote: »

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.

Even for your cheap choc bars ‘the rules’ are likely to be rather more complex than that. Their price may be determined by margins, volumes, or even predatory pricing with little to do with supply and demand. The price of beer in pubs didn’t rise because of demand but largely for the opposite reason: lack of volume required higher margins. But the similarity between the pricing of choc bars, beer, and the value of equities is so tenuous it’s not something to spend much time on.

I assume what you meant was that the price of equities falling wasn’t necessarily a bad thing for buyers and if so I’d be with you on that. But unlike the price of choc bars it certainly isn’t necessarily a good thing either.

I don’t much like analogies which often confuse more than enlighten but if you really wanted one then perhaps the price of fruit in a market might be better. A trader selling off oranges for half price might be offering a bargain. Or he might know that they’re going rotten. It’s for you to research what you’re buying.

I didn’t chase the market on Friday, made no sense to me at that point, but being cheaper isn’t the same as being cheap or good value. You need to decide whether stocks offer good value on other than what someone would have paid last week. They aren’t choc bars.

If fortunes could be made with simple rules then those iffy trading systems that promise success would work and the con-men who sell them would be rich. They don’t and they aren’t. So too if their efforts were so reliable then the chartists at the IC would have paid off their mortgages and given in their notices long ago. It's fantasy to believe otherwise. Whatever call you decide to make, good luck.

oldvicar

slopemaster wrote: »

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.

:eek: You're quite a gambler then.

BTW, the government doesn't and never has guaranteed these deposits!

If you still have faith in the independent guarantees, or government bail-outs, and are worried about inflation, then the Post Office (Bank of Ireland UK) pays RPI + 1% over 5 years, seemingly achieving what you have SAID you want (but tax can reduce this).

Or maybe you're just using the headlines about savers struggling to keep ahead of inflation, because deep down you're really looking for an excuse to speculate and invest the inheritance in something slightly more exotic. You don't just want to preserve your wealth, you want to grow it and be rich. Right? Go on, admit it!

Despite my own protestations of being ultra cautious I will admit to having a small proportion of my assets in a few blue-chip shareholdings which I intend to keep long term. The dividends are very tempting (ie they have gone down in price a lot), and I expect them to do well.:rotfl:

slopemaster

Rollinghome wrote: »

A trader selling off oranges for half price might be offering a bargain. Or he might know that they’re going rotten.

Yes, I like that one.
Having both got really good bargains, and bought rotten fruit, on the market.

slopemaster

oldvicar wrote: »

...maybe ...deep down you're really looking for an excuse to speculate and invest the inheritance in something slightly more exotic.

Maybe...
first thought tho was to put money into property.
Then I worked out two thirds is in property already, so that would probably be silly!

Yes, maybe I should put a smallish amount into sonething speculative...

slopemaster

oldvicar wrote: »

:eek:
If you still have faith in the independent guarantees, or government bail-outs.....

Funnily enough, I have a lot less faith in them now than I did 3 years ago.
Having previously despised Gordon Brown, i thought he handled that whole Icelandic 'crisis' very well as Chancellor - I was impressed.

Whereas I suspect the current lot would leave 'ordinary' savers to sink or swim, and say 'tough'...

jamesd

slopemaster wrote: »

He said it was a bad time to invest - something about the Greek debt crisis and how markets have lost 5% in the last couple of days and that would be 5% of my money!

That says it all. Find a better IFA. The time to invest is when there's blood on the floor and chaos in the markets with most people afraid to.

While it's not for everyone I've made around £5,000 between last Thursday morning and now using spread betting and about £15,000 of initial capital. That's not a bad week's work IMO. The leverage makes it very high risk if you use that leverage. For prudence you shouldn't use more than ten percent or so of your pot for investments if using leverage. Or you can just use the leverage for ten percent and stick most of the other 90% in a mortgage offset account, gaining twice from the same money. That's the sort of thing that greatly reduces the risk because you're safe from margin calls. Just buy whatever you'd buy anyway. You shouldn't consider using this really, I'm just using it as an example of how it's possible to do very nicely in hugely turbulent markets.

Meanwhile I switched some of my cash in my ISA into investments today.

For an IFA there's been a lot of attention to inappropriately high risk recommendations so it's not surprising if some are over-cautious.

slopemaster wrote: »

I have a lump of money which I will need to draw on for living expenses, but which I also want to try to protect from inflation. So my thoughts were to maybe keep 50% in cash, and invest the other 50% in a range of stuff. However, his initial suggestion was that I should keep it all in cash and use term accounts of different lengths etc.

For inflation protection, that combined with waiting for the next chance at an NS&I inflation-linked certificate is pretty good advice for someone who wants low risk.

slopemaster wrote: »

Then he said, that if I did want to invest, he would recommend something with a guaranteed return like one from the Pru. Of course these things where your capital is protected are superficially attractive, but I always thought that most advisors on here said they were rubbish?

I don't know that Pru one but typically if you're offered a capital protected product that's say linked to the stock market you can beat it with:

1. About 75% in a term deposit account for the target term.
2. The remaining 25% in an index tracker fund for whatever you're tracking.

The interest on the cash plus the dividends from the investments add up to produce a guarantee of 100% of your starting capital back, ignoring inflation. the exact percentage split depends on interest rates.

slopemaster wrote: »

Now, perhaps this was just a polite way of saying that he wasn’t really that interested in me as a client?

Your objective means it probably wouldn't have paid enough to be worth doing unless he charged a fee and that wouldn't have paid for you. Better to give you some free pointers and not have any liability.

On the other hand, if you'd take even 10% capital value drop in a bad year, you can do better, probably, at the moment. Though taking 30% is better because it allows more exploiting of current relatively cheap share/fund prices.

slopemaster wrote: »

I would have thought that when everyone is panicking is a GOOD time to get in, not a bad one… But he seemed to think things will go from bad to worse.

Your thought is right. Read Mr. Buffett's writings.

jamesd

slopemaster wrote: »

The second guy asked lots of Qs and just said, well these are the areas that need further discussion, rather than - this is the answer. So I've arranged to go in and see him.

That's a much more promising start!

That Jupiter Merlin Income Portfolio fund has an FE risk score of 43 according to its summary. 100 is the risk of the FTSE Index of the UK stock market, and it's delivered about that as well, dropping by about 43% of what the FTSE did.

I quite like both that one and Invesco Perpetual Distribution, which would probably be top of my suggestion list as a non-IFA.

If you do use investments, ask the IFA whether we're in a bond price bubble and how you should adjust any bond components to reduce the risk related to that. The bubble is high prices/low yields (interest rates) because of all of the low interest rate policies in the developed world. Ask whether a higher than normal commercial property allocation and lower than usual high grade bond and gilt allocation may be useful protection that exploits the currently unloved commercial property sector's prices.

sabretoothtigger

If fortunes could be made with simple rules then those iffy trading systems that promise success would work and the con-men who sell them would be rich.

Find a company with expanding prospects and you have a simple rule that works. If complicated degree level mathematics was the best way to trade then CDO housing debt would never have collapsed like it did, it was the simple take that saw it obviously not a good investment.

It didnt require more then 5 minutes thinking to realise they had stacked up the odds of success continually.
Actually profiting from that while prices rose was another matter hence Im just trying to say the opposite is partly true that prices can go lower when a company is increasingly a good investment.
The actual results arent easy though and it takes more capital then I have

They already have supercomputers trading the markets. A computer can beat humans at Jepodary or at Chess so why not trading or investment. Its sucess has been limited to very short dated trades because its not about maths, in the majority its about simple understanding and perception of flawed human actions

analogies which often confuse more than enlighten

It might be wrong but it shouldnt be confusing.
Its better to take the attitude of buying and consuming that product then continually worry about prices. Prices are secondary to whether you actually want it or not.
The consuming part would relate to world consumption of that product.

Ten years ago growth in mobile phones was a good bet, USA especially was way behind the curve due to a sometimes sparse population I think.
Actually taking that idea forward and knowing where to invest is more complicated, but the basic premise is totally simple right.
Im saying the simplest part of an idea is the most important