The Stock Market Takes Another Dive - Steer Clear ?

GeorgeHowell

srcandas wrote: »

Following this thread that throws up some real gems and understanding at times, and entertainment at others, I am beginning to side with IFA thinking (which is not my natural position ). The posts from the IFA side of the house seem to be logical and based on fact, those on the other side of the house seem to use an awful large amount of hindsight.

Perhaps I'm being hoodwinked by the eloquence of our highly educated IFAs

But do keep going, very entertaining :beer:

That's because those on the IFA side of the house are used to putting a positive spin on everything for a living. They use this forum for practice. All the apparently logical argument and data skates over the facts that the FTSE100 index (which is THE index whether they like it or not) is down 20%+ from its peak 12 years ago, that the holy grail of the balanced portfolio which will maximise returns is unacheivable for ordinary mortals, that investing abroad builds in exchange rate risks which can offset other gains, and that some people are just not suited to seeing the nominal value of their capital go down, even slightly, even for short periods. It is their sliver-tonguedness that keeps IFAs in business. If they were as good at making investments as they are at talking them up we could all be rich.

I don't think I've ever heard of an IFA saying to someone that now is not a good time to buy into the markets, come back when the index goes down to xxxx and there might be some bargains to be had -- meanwhile put your money in savings accounts.

MrMalkin

GeorgeHowell wrote: »

All the apparently logical argument and data skates over the facts that the FTSE100 index (which is THE index whether they like it or not) is down 20%+ from its peak 12 years ago, that the holy grail of the balanced portfolio which will maximise returns is unacheivable for ordinary mortals.

Now you're just being a moron. Understanding that the FTSE doesn't include re-invested dividends is basic stuff, it's investing 101. Sure it's annoying that the press rely on bare FTSE numbers for their reports but it's not exactly difficult to see past that.

As for a balanced portfolio being unachievable for 'ordinary mortals' it really isn't. It's not hard to select a portfolio with between 3 and 8 funds that cover most of the major asset classes, and if even that is too difficult there are funds around that have an entire diversified portfolio in a single fund - such as the Vanguard LifeStrategy ones. Rebalancing and PCA aren't exactly difficult either.

A lot of pension funds do all of this for you anyway.

srcandas

GeorgeHowell wrote: »

I don't think I've ever heard of an IFA saying to someone that now is not a good time to buy into the markets

George I must say that in the last 6 months I have had one say that and I've found it difficult to give any of the three I have approached any money as they don't think I need to give them any at the moment. Two of the three (one comments here) have answered my questions in great detail for nothing.

So my experience, although agreed limited to three samples, shows 100% the opposite of your experience. As I said I was a skeptic but sometimes I think one just needs to be open to something different.

I think the problem for the anti IFA (if I can put it that way) is the only, and I mean only, argument is based on one set period of time based on one index. Nothing else has been offered. The IFA s I have met in my life time have never suggested entering an investment at one point in time and never in the FTSE100 - so it's difficult to see the value in the example.

But each to their own :beer:

GeorgeHowell

MrMalkin wrote: »

Now you're just being a moron. Understanding that the FTSE doesn't include re-invested dividends is basic stuff, it's investing 101. Sure it's annoying that the press rely on bare FTSE numbers for their reports but it's not exactly difficult to see past that.

As for a balanced portfolio being unachievable for 'ordinary mortals' it really isn't. It's not hard to select a portfolio with between 3 and 8 funds that cover most of the major asset classes, and if even that is too difficult there are funds around that have an entire diversified portfolio in a single fund - such as the Vanguard LifeStrategy ones. Rebalancing and PCA aren't exactly difficult either.

A lot of pension funds do all of this for you anyway.

I don't think it's helpful or appropriate to call people morons for expressing a contrary point of view. In addition it savours of desperation. Privately I can, and do, think of all sorts of unflattering invective to describe the IFA brigade and their camp followers. But I desist from posting it, however much tempted.

GeorgeHowell

srcandas wrote: »

George I must say that in the last 6 months I have had one say that and I've found it difficult to give any of the three I have approached any money as they don't think I need to give them any at the moment. Two of the three (one comments here) have answered my questions in great detail for nothing.

So my experience, although agreed limited to three samples, shows 100% the opposite of your experience. As I said I was a skeptic but sometimes I think one just needs to be open to something different.

I think the problem for the anti IFA (if I can put it that way) is the only, and I mean only, argument is based on one set period of time based on one index. Nothing else has been offered. The IFA s I have met in my life time have never suggested entering an investment at one point in time and never in the FTSE100 - so it's difficult to see the value in the example.

But each to their own :beer:

The issue is not just about IFAs, but also the fund management companies whose products they peddle. These outfits have the resources to advertise nationally, and create the climate in which the IFAs operate. Until the last decade or so the (probably) indisputable conventional wisdom was that given long enough equities will outperform everything and anything else by leaps and bounds. However inconvenient it may be for the financial services industry, the last 12 years has been a game-changer and demonstrates that conventional wisdom to no longer necessarily be the case. Because it has only one weapon in its armoury, the equities-based financial services industry is in denial about this reality (as we witness on these boards) and tries to brainwash the general public likewise.

jimjames

GeorgeHowell wrote: »

I don't think it's helpful or appropriate to call people morons for expressing a contrary point of view. In addition it savours of desperation. Privately I can, and do, think of all sorts of unflattering invective to describe the IFA brigade and their camp followers. But I desist from posting it, however much tempted.

I agree it isnt helpful but equally I can understand the frustration. It isn't a case of expressing a contrary view, its the fact that you either aren't listening or aren't understanding the views and are continually repeating incorrect information as "facts". Suggesting that anyone who invests in shares is part of an IFA brigade and a follower is fairly offensive too as there are a huge number of private investors who have never used an IFA and wouldn't appreciate being lumped together in a herd.

Your posts seem to switch from one thing to another and then include things that weren't in a previous post - for example all mention of IFAs now appears to include all fund management companies as well. Of course a fund manager will always try to sell funds, thats their job. It is no different to Tesco selling food and then wondering why you weren't advised not to buy your shopping this week.

MrMalkin

GeorgeHowell wrote: »

However inconvenient it may be for the financial services industry, the last 12 years has been a game-changer and demonstrates that conventional wisdom to no longer necessarily be the case. Because it has only one weapon in its armoury, the equities-based financial services industry is in denial about this reality (as we witness on these boards) and tries to brainwash the general public likewise.

The last 12 years haven't been anything exceptional in terms of equities, both the 30s and the 70s were generally quite poor in terms of their performance and indeed both were worse than this latest bear market. Neither period did anything particular terrible to the long term performance of those assets, indeed for almost all 30-year periods on record equities have been the best performers.

And nice little attack on the 'sheeple' who are just to stupid to stop themselves falling for IFAs and the fund industry pulling wool over our eyes, conveniently ignoring the significant number of people who have never visited an IFA and who use dirt cheap index funds - like myself. But I think people who don't use this strategy are highly likely to outperform the sort of 'advice' you're prattling on about.

IFAs and the fund industry certainly need to be held to account for the fees they charge, but to suggest that anyone who decides to avail themselves of their services is 'brainwashed' is one of the stupidest of the many stupid things you've said in this thread.

Aegis

GeorgeHowell wrote: »

That's because those on the IFA side of the house are used to putting a positive spin on everything for a living.

Sorry, but this is yet another false accusation. My role is to ensure that my clients know that there will be both bad times and good, I don't gloss over the bad points and spin everything in a positive manner.

They use this forum for practice.

Again, this is outright false. I used to use this forum to gather knowledge. Now I post here because I genuinely think I can help people, often those who wouldn't be able to afford to pay for financial advice or who won't go to an adviser for various reasons. I enjoy helping out.

All the apparently logical argument and data skates over the facts that the FTSE100 index (which is THE index whether they like it or not) is down 20%+ from its peak 12 years ago

Whether you like it or not, the FTSE100 is not THE index as you described it. You claimed that most managers are unable to beat THE index, and that's absurd if you're claiming that this always refers to the FTSE. Emerging Market funds beat the FTSE regularly, for example, and that's not a problem with the Efficient Market Hypothesis because those funds aren't benchmarked against the FTSE, they're benchmarked against other indices.

The FTSE is merely one measure, and it's a measure of capitalisation only, not the total return. It's also only an impenetrable barrier if (i) you accept the strong form of the efficient market hypothesis and (ii) you have a manager constrained to only invest in FTSE 100 companies.

Also, no-one is skating over the fact that the FTSE was at an all time high 12 years ago. Advisers are generally quite aware that bubbles form periodically in most markets, and looking back to the peak of the last really major bubble really isn't that important a timeframe unless someone actually invested at that peak. Focusing in on the bad times is at least as bad, probably worse, than only highlighting the good results, and deliberately ignoring the effects of dividends to constantly exaggerate your point is borderline dishonest.

that the holy grail of the balanced portfolio which will maximise returns is unacheivable for ordinary mortals

It's not about maximising returns, it's about getting a blend of returns from a variety of asset classes and sectors. "Ordinary mortals" are just as able to gain access to such portfolios with the advent of cheap fund supermarkets and a wide variety of risk-managed portfolio funds available on the market for those who don't want to construct their own. As such, it takes about £1,000 or £50 a month to put together a balanced portfolio these days.

that investing abroad builds in exchange rate risks which can offset other gains

Fully explained whenever I recommend emerging markets, though this can be mitigated through currency hedging if desired.

and that some people are just not suited to seeing the nominal value of their capital go down, even slightly, even for short periods.

In which case they don't get an investment into this sort of risk asset. If that sort of client came to me, I'd probably be forced to either talk about guaranteed products of some sort (including cash) or to challenge their views and work with them so that they understood the nature of risk verses reward, along with the risk of inflation eroding capital even in "safe" products.

It is their sliver-tonguedness that keeps IFAs in business. If they were as good at making investments as they are at talking them up we could all be rich.

Why would you expect that? Getting rich requires putting in a lot of seed capital. You can't make someone rich if they don't put aside quite a bit of money to begin with.

Speculation can make you rich. A good job can make you rich. Inheritance can make you rich. Entrepreneurial ventures can make you rich. In general, investing is designed to keep you rich and possibly to make you a bit richer as time passes.

IFAs shouldn't be peddling schemes to make people as rich as possible, because get-rich-quick schemes fail more often than they succeed from what I've seen. A good IFA should be recommending a slow and steady accumulation of wealth with a portfolio designed to try and grow a bit each year. If the client wants to take a few punts on shares or ventures designed to shoot up in value, then the IFA should help them to evaluate the risk and to minimise the impact if it all goes wrong.

We're not investment miracle workers, we're just here to help turn current wealth into future wealth and to help clients manage their cash flows and taxes.

I don't think I've ever heard of an IFA saying to someone that now is not a good time to buy into the markets, come back when the index goes down to xxxx and there might be some bargains to be had -- meanwhile put your money in savings accounts.

I've said exactly that to clients when certain indices or asset prices were too high, though usually I suggest looking at something which represents better value at the time.

I've also recommended that someone phase in to an investment because I can't guarantee when the best time to invest is, or even to pound cost average across the life of their investment to smooth out the volatility as time passes.

atush

Never heard it explained better, but don't expect the deaf will hear it

;-)

Chargem

GeorgeHowell wrote: »

[snip].. the holy grail of the balanced portfolio which will maximise returns is unacheivable for ordinary mortals ..

You've said something akin to this a couple of times now, and I wanted to clarify that the reason you balance a portfolio is for the completely opposite reason to maximizing returns - you do it to spread risk, or avoiding putting all your eggs in one basket.

those on the IFA side of the house are used to putting a positive spin on everything for a living. They use this forum for practice.

For someone who complains about others being insulting, this accusation is very ironic. I have no real opinion on IFA's in general, but the IFA's who post here are just helping people out in their spare time, in my opinion.