Long term savings? Gold?

koru

GeorgeHowell wrote: »

Not everyone is seeking the maximum return, with hindsight. For many people the security of their nominal capital is the #1 consideration. They will gladly sacrifice a 90% chance (based on history) of a somewhat higher return in exchange for the 100% security of their capital in nominal terms. In terms of overall utility the peace of mind and the relative lack of stress in the downturns outweighs any monetary disadvantage that may arise, with hindsight.

I can understand that attitude, and I think it is fine as long as the person making the decision fully realises that preservation of their capital in nominal terms might turn out to mean a fall in the spending power of their capital after adjusting for inflation. The Barclays study that I mentioned previously shows that cash often fails to beat inflation. The table at the bottom of page 92 shows that over the last 11 decades cash provided a negative real return (that is, after inflation) in five of those decades, whereas equities only failed in one of those decades. The least I expect from long-term investment is to preserve the spending power of my capital. The historical evidence strongly suggests that cash is much more risky from this perspective than equities.

GeorgeHowell wrote: »

In my view the way that more capital risky investments then cash are marketed often fails to provide a fair and true view, especially to relatively naive investors. In addition, as we know there have been examples where capital-risky products have been sold to the unwary unsuitably and/or without such risks being sufficiently flagged up. If the marketing described the risks and probabilities in the intelligent and reasonable way they are described on much of this thread it would be a different matter, and caveat emptor could fairly apply.

No doubt the counter-argument will be to say, "Come on, grow up and get real, this is marketing we are talking about. It's always going to paint a rosy picture and try to ignore the negatives." That's true, but most marketing does not involve decisions potentially about people's whole life savings and future financial security.

Here, I completely agree with you. I feel confident in putting most of my money into equities because I have invested the time in slogging through documents such as the Barclays study and so I think I have a very good understanding of why I am investing as I do and what risks I am taking. If you don't make the effort to do this, you are at the mercy of all the marketing BS.

DiggerUK

atush wrote: »

....given how much gold has fallen in the last 3 months....

plarka, the price of gold has dipped in last three months. But looked at over the last year it is up again, going from under £900, to over £1,000 an ounce. Nothing comes anywhere near that performance in the last year. All stock exchanges on the other hand have been slammed down, and are still a long way off their 1999 highs.

The trend has continued up, and what few can explain is why gold is up? You will either come to the conclusion that it is a bubble waiting to burst, or is just a reflection of how the value of cash has been debased by printy printy.

The value of many equities has dropped to zero over the last 30 years. All the stock exchanges and bourses represent, are the horses still fit to run.

Gold on the other hand, has never been without value, never been worthless, and in my opinion carries no risk. It is for the long term, don't forget, today's rises are only a reflection of highly unusual economic times. But then again, you duz your research, and you pays your money.
..._

Ark_Welder

DiggerUK wrote: »

plarka, the price of gold has dipped in last three months. But looked at over the last year it is up again, going from under £900, to over £1,000 an ounce. Nothing comes anywhere near that performance in the last year.

Index-linked gilts +22%, conventional gilts +15%. And 10% of the latter was before the second round of QE had been started in October.

The problem with holding gold over recent months is that it has been showing greater correlation with other risk assets, i.e. equities and lower-grade bonds etc. It has had sharp daily falls, and that is removing some of its perceived haven-status, i.e. more a 'risk on' asset, with USD and Treasuries being the (only?) 'risk off' conterparts. Perhaps a sign of how easily traded for Retail it can be with access via ETFs. [edit] Plus the need for hedgies to take profits to cover losses elsewhere.

What will happen next year to gold or gilts? Who can say for sure (anyone can make a guess...;)). Medium to longer term, though, depends upon how USD-positive you are: 2012 might give a resolution to political imbalances in the USA; further out, energy self-sufficiency (at least on a hemisphere bases) if shale gas, etc., is fully developed as an energy source. For me, it is how the latter develops that could determine whether the US equities could be a good place for a longer term allocation.

No doubts that the same sentiments will be expressed this time next year though - perhaps with just a change in the positioning of the asset names...:)

atush

DiggerUK wrote: »

plarka, the price of gold has dipped in last three months. But looked at over the last year it is up again, going from under £900, to over £1,000 an ounce. Nothing comes anywhere near that performance in the last year. All stock exchanges on the other hand have been slammed down, and are still a long way off their 1999 highs.

The trend has continued up, and what few can explain is why gold is up? You will either come to the conclusion that it is a bubble waiting to burst, or is just a reflection of how the value of cash has been debased by printy printy.

The value of many equities has dropped to zero over the last 30 years. All the stock exchanges and bourses represent, are the horses still fit to run.

Gold on the other hand, has never been without value, never been worthless, and in my opinion carries no risk. It is for the long term, don't forget, today's rises are only a reflection of highly unusual economic times. But then again, you duz your research, and you pays your money.
..._

I am not plarka.

And Id o know it was up over eh calendar year. My point (which all metal bugs cannot contempalte) si that you keep ramping trying to draw in unsofisticated souls when the price is actually falling.

I made my owndecision on gold and it paid off handsomely. But I dont ever sugggest people should pile in when they don't have enough other assets. Nto to mention I buy when others sell and sell when others are buying (as I did earlier this year with half my pot to lock in gains).

marms

DiggerUK wrote: »

plarka, the price of gold has dipped in last three months. But looked at over the last year it is up again, going from under £900, to over £1,000 an ounce. Nothing comes anywhere near that performance in the last year. All stock exchanges on the other hand have been slammed down, and are still a long way off their 1999 highs.

The trend has continued up, and what few can explain is why gold is up? You will either come to the conclusion that it is a bubble waiting to burst, or is just a reflection of how the value of cash has been debased by printy printy.

The value of many equities has dropped to zero over the last 30 years. All the stock exchanges and bourses represent, are the horses still fit to run.

Gold on the other hand, has never been without value, never been worthless, and in my opinion carries no risk. It is for the long term, don't forget, today's rises are only a reflection of highly unusual economic times. But then again, you duz your research, and you pays your money.
..._

I remember you telling people to invest in gold when it was over £1100 an ounce, anyone that took your advice then is now over 10% down. With little chance of the price increasing significantly and no returns from holding gold, that money's gone for good.

Rollinghome

koru wrote: »

The Barclays study that I mentioned previously shows that cash often fails to beat inflation.

People frequently refer to the Barclays Equity Gilt study as if it's disinterested, purely accademic, reasearch which of course it isn't. It's primarily sales material given to Barclays Wealth customers and widely used to sell investments.

Look at their figures by all means but take into account how they are calculated and understand what they are. For example, no costs are deducted for equities and the "return on cash" bears little relationship to the actual return savers might easily achieve. The cash return for the last dozen or so years has been based on the Nationwide Invest Direct account which currently pays 0.2% and so not very representative of the return any reasonably attentive saver might get. The basis for calculations before that was arguably even less realistic.

NS&I Index- linked Savings Certificates always paying in excess of inflation and tax free have been an option for retail investors for many years though that has often been below the best returns from banks and building societies.

A more realistic comparison of the historical returns on various asset classes would be useful but that isn't likely to come free of charge from any organisation that profits, whether directly or indirectly, from the marketing or sale of any of those assets.

DiggerUK

atush wrote: »

I am not plarka......

I am well aware of that, but as plarka was the author of the thread I addressed my comments to them, not you.
I'm sure plarka may be interested in the gilts you mentioned paying 15 and 25%, seing as how they are asking for suggestions as to what to do with their cash.
It would show some respect to the author of this thread if you provided a source for your claim whilst you are at it.

marms wrote: »

I remember you telling people to invest in gold when it was over £1100 an ounce........

News to me plarka, news to me.
Seems I have been of the opinion that falls are more likely; you may care to check my previous posts.
..._

Masomnia

DiggerUK wrote: »

The trend has continued up, and what few can explain is why gold is up? You will either come to the conclusion that it is a bubble waiting to burst, or is just a reflection of how the value of cash has been debased by printy printy.

But the money supply is shrinking, or growing at around 1 - 5% yoy depending on how you measure it. There seems to be very little correlation to me. So I shall stick with bubble waiting to burst.

koru

Rollinghome wrote: »

People frequently refer to the Barclays Equity Gilt study as if it's disinterested, purely accademic, reasearch which of course it isn't. It's primarily sales material given to Barclays Wealth customers and widely used to sell investments.

Look at their figures by all means but take into account how they are calculated and understand what they are. For example, no costs are deducted for equities and the "return on cash" bears little relationship to the actual return savers might easily achieve. The cash return for the last dozen or so years has been based on the Nationwide Invest Direct account which currently pays 0.2% and so not very representative of the return any reasonably attentive saver might get. The basis for calculations before that was arguably even less realistic.

NS&I Index- linked Savings Certificates always paying in excess of inflation and tax free have been an option for retail investors for many years though that has often been below the best returns from banks and building societies.

A more realistic comparison of the historical returns on various asset classes would be useful but that isn't likely to come free of charge from any organisation that profits, whether directly or indirectly, from the marketing or sale of any of those assets.

Ah, I was trying to find an explanation of how they derived the return of cash, but I could not find anything. In that case, they are probably understating the return on cash by at least 2%. The figures for cash should probably be closer to the figures for gilts.

I take your point about Barclays not being entirely disinterested, although I think they manage a lot of gilts and bonds funds as well as equity funds, so they are not necessarily predisposed to see equities as being a better place for their clients to put their money than gilts.

Of course, if Barclays were pulling out all the stops to encourage people to invest in equities, they could have looked at the returns and variability of long-term returns from a well diversified equity portfolio, rather than just limiting to UK large caps. I suspect this would show a higher average return and a lower likelihood of poor long-term returns.

fizio

Hi,
I'm actually looking to buy into gold over the coming few months and having done some research I have concluded that I'd like to do it via an ETF in an ISA through Hargreaves Lansdown (just my conclusion).
Anyway I tried to find out the choice of funds that meet my criteriea on teh H&L website but am struggling to work out which are ETF's and also eligible for ISA as the ones with ETF in teh title aren't eligible and the ones that are eligible don't mention they are ETF. Any advice appreciated as I'd like to nail down the fund so I can then work on the timing,

As an aside, this is to have a balanced portfolio as I already have a good split of stocks/bonds/property/etc and the general advice is to have around 5% of portfolio in gold (assuming you believe that advice)