The Stock Market Takes Another Dive - Steer Clear ?

Radiantsoul

fairleads wrote: »

Guys
Capital growth is an absolute term. It needs little or no further qualification or interpretation. It states that I want my net worth to grow year on year. It is my goal, the be all and end all.
In my quest for capital growth I can use one or more methods, total return being one, and that’s what total return is, a method or strategy. It may or may not increase my net worth. So, if I were to seek advice from an IFA and I were to state, unequivocally, that he or she must use a total return strategy, then I have no cause for complaint if, as a result, my net worth decreased year on year. However, if I were to advise the IFA that I need my capital to grow …………..

I am not sure if I am not clever enough to understand this, or if it nonsense.

Thrugelmir

Radiantsoul wrote: »

I am not sure if I am not clever enough to understand this, or if it nonsense.

Confuses me totally.

fairleads

Aegis wrote: »

I think you're confusing total return and absolute return. Absolute return is the strategy by which you attempt to achieve positive returns in all market conditions. Total return is the measure of an asset's performance when you include both the capital gains and the income received over the course of the holding period.

To give an example of total return, take the FTSE 100. The standard index simply measures the capitalisation of the 100 largest companies listed on the UK main exchange. This is the capital growth of those companies (with a little bit of swapping of holdings as companies are added and removed from the 100). The FTSE Total Return index is adjusted to include the effect of reinvesting dividends over any given timescale. As such, the FTSE Total Return index grows faster than the FTSE because it includes the effect of dividends every year.

Another description of it, taken from here (first description that came up on Google):



I can only imagine that the confusion comes from companies like Ruffer calling their absolute return strategy fund their "Total Return Fund". But that's just a name designed to sound attractive, and I guess they felt Absolute Return sounded too much like a hedge fund.

Precisely, total return is just that, a measure. It can be positive or negative. However, when i state that i invest for capital growth that is what i expect to achieve - growth - a positive result. Incidently, I first started investing many many years before the advent of google.........

Radiantsoul

First total return was a strategy or method.

Now it is a measure.

fairleads

Radiantsoul wrote: »

First total return was a strategy or method.

Now it is a measure.

It can be both.

bigadaj

Of course, if you are an economist you can have negative growth.

1echidna

bigadaj wrote: »

Of course, if you are an economist you can have negative growth.

Indeed, anyone but a financial adviser, it's not in their vocabulary.

Aegis

1echidna wrote: »

Indeed, anyone but a financial adviser, it's not in their vocabulary.

Ok, that was a bit of a weird accusation. Of course it's in my vocabulary. As it happens, when writing reports I include the warning "these investments are not guaranteed in value and you may get back less than you invest" any time I include an asset with any level of risk. I also discuss the possibility of this happening with clients before I even agree to write their reports.

1echidna

Aegis wrote: »

Ok, that was a bit of a weird accusation. Of course it's in my vocabulary. As it happens, when writing reports I include the warning "these investments are not guaranteed in value and you may get back less than you invest" any time I include an asset with any level of risk. I also discuss the possibility of this happening with clients before I even agree to write their reports.

I'm still bitter on behalf of all those who lost money in the crash of (when was it 2006). I lost a little but it wold have been a lot, lot more if I had followed the steer of several financial advisers about the disbursement of an inheritance. That's not to say I don't have faith in investing as a principle, but my belief is that things are a bit tricky just now.

dunstonh

I'm still bitter on behalf of all those who lost money in the crash of (when was it 2006). I lost a little but it wold have been a lot, lot more if I had followed the steer of several financial advisers about the disbursement of an inheritance. That's not to say I don't have faith in investing as a principle, but my belief is that things are a bit tricky just now.

How is that the wrong advice? No-one has a crystal ball and all you can do is invest knowing that there will be periods like this. Investments will go down as well as up. You dont know when. You dont know by how much. Typically, you find that 2006 investments are now valued at or above what cash interest rates would have paid.