The Stock Market Takes Another Dive - Steer Clear ?

MrMalkin

GeorgeHowell wrote: »

If equities have been the indifferent option that you describe for long periods in the past, the financial services industry hasn't caught up with that reality because their pitch is that over the long term equities outperform anything -- equities are a 'no brainer'.

The point, as you continually fail to grasp, is that despite those periods of poor performance shares do continue to outperform. Poor 10-year periods have done nothing to dent the 30-year performance of shares, which with very few exceptions continue to outperform everything else - thus explicitly disproving the point that you've expressed above. It's not the financial services industry that doesn't understand this new 'reality', it's you who doesn't understand basic investment history or the fact that long term returns are not significantly damaged by short-term volatility. See:

http://www.telegraph.co.uk/finance/comment/tom-stevenson/8469660/What-history-tells-us-about-returns-over-the-next-30-years.html

That result prompted me to take a look at each 30-year period covered by the Barclays database, starting with 1899-1929 and ending with 1980- 2010. There are 82 of them and they paint a remarkably consistent picture. For most of the past century, anyone investing for a 30-year period has been rewarded with a return in excess of inflation of between 4pc and 8pc a year if they were sensible about re-investing the dividend income from their holdings.

I note you have failed to produce a single data point, other than your trite example of the FTSE, that either backs up your position or refutes what others have said in opposition to your view. Your adherence to your ill-informed opinion is clearly the issue here, nothing else.

GeorgeHowell

MrMalkin wrote: »

The point, as you continually fail to grasp, is that despite those periods of poor performance shares do continue to outperform. Poor 10-year periods have done nothing to dent the 30-year performance of shares, which with very few exceptions continue to outperform everything else - thus explicitly disproving the point that you've expressed above. It's not the financial services industry that doesn't understand this new 'reality', it's you who doesn't understand basic investment history or the fact that long term returns are not significantly damaged by short-term volatility. See:

http://www.telegraph.co.uk/finance/comment/tom-stevenson/8469660/What-history-tells-us-about-returns-over-the-next-30-years.html



I note you have failed to produce a single data point, other than your trite example of the FTSE, that either backs up your position or refutes what others have said in opposition to your view. Your adherence to your ill-informed opinion is clearly the issue here, nothing else.

The FTSE 100 is down about 20% from its peak of 12 years ago. That is hardly short-term volatility. If 12 years is short term, then long term must represent longer than most people's lifetimes. The FTSE 100 represents 80% of UK quoted equity, so it is hardly possible for the majority of investors to avoid it or minimise their holdings within it -- there isn't enough else left left to go round. To keep trying to sidestep this fundamental reality and shift in circumstances, and to discredit the people stating it with petty and pompous insults, is preposterous and disingenuous in the extreme.

gadgetmind

mr_fishbulb wrote: »

Exactly. When it dipped in August last year I took the opportunity to get Diageo at £11.50

According to my records, I bought my Diageo holdings in one chunk on 24th of August for just under £10.95.

Happy days.

MrMalkin

GeorgeHowell wrote: »

The FTSE 100 is down about 20% from its peak of 12 years ago. That is hardly short-term volatility. If 12 years is short term, then long term must represent longer than most people's lifetimes. The FTSE 100 represents 80% of UK quoted equity, so it is hardly possible for the majority of investors to avoid it or minimise their holdings within it -- there isn't enough else left left to go round. To keep trying to sidestep this fundamental reality and shift in circumstances, and to discredit the people stating it with petty and pompous insults, is preposterous and disingenuous in the extreme.

The only preposterous thing is your pathetic refusal to acknowledge the facts, even now you continue to adhere to your discredited adherence to the FTSE being the be-all and end-all of portfolios. You're the one sidestepping the facts presented in opposition to your viewpoint and showing a pig-headed unwillingness to understand anything. Your posts have shown that you have a clear lack of understanding of even basic portfolio management, yet you feel qualified to lecture people about these things.

Also FYI you don't know what 'disingenuous' means.

Chargem

GeorgeHowell wrote: »

So what are we saying here, that IFAs come up with recommendations not necessarily aimed at maximising returns for their clients (meaning capital growth plus income) ? If so what on earth is the point of them ? That would be like going to see doctors whose role is not necessarily to make you better.

"Maximising returns" might mean investing 100% of your investment capital in equities and emerging market funds. Do you think this is appropriate for a 75 year old pensioner dependent on income from his investment capital? No? But wouldn't that 70 year old want his IFA to maximise his returns?

Masomnia

GeorgeHowell wrote: »

The FTSE 100 is down about 20% from its peak of 12 years ago.

Including dividends?

Linton

GeorgeHowell wrote: »

The FTSE 100 is down about 20% from its peak of 12 years ago. That is hardly short-term volatility. If 12 years is short term, then long term must represent longer than most people's lifetimes. The FTSE 100 represents 80% of UK quoted equity, so it is hardly possible for the majority of investors to avoid it or minimise their holdings within it -- there isn't enough else left left to go round. To keep trying to sidestep this fundamental reality and shift in circumstances, and to discredit the people stating it with petty and pompous insults, is preposterous and disingenuous in the extreme.

The FTSE 100 does not represent the British economy - why?
1) Much of British industry is foreign owned - for example all car manufacturing, steel, most electronics and chemicals etc
2) Much of the FTSE100 isnt in the UK - there are global companies with a UK base but with comparatively little involvement in the UK (for example miners and drillers) and several foreign companies which choose to be quoted on the London exchange but with no UK involvement whatsoever.

The FTSE has been highly volatile over the last say 15 years. Yes its 20% down from its maximum of 12 years ago BUT 70% up from its minimum of 9 years ago. For anyone to base an investment strategy on the FTSE seems madness to me.

Its easy for investors to have minimal or even zero investment in the FTSE100 if that's what they want. Investment is now a global activity. The London exchange represents only 6% of the global stock market capitalization. So of course there is "lots to go round".

So the basis of your arguments is a small, unrepresentative, and somewhat disparate collection of shares that just happen to be quoted on an individual exchange. Seems pretty weak to me.

jimjames

Linton wrote: »

So the basis of your arguments is a small, unrepresentative, and somewhat disparate collection of shares that just happen to be quoted on an individual exchange. Seems pretty weak to me.

It might be pretty weak if it was based on facts but as has been pointed out a number of times in this thread it isn't even based on facts.

Just because the FTSE is down over one (odd) specific time period of 12 years doesn't mean that it is a bad investment to buy shares. All the other time periods that have performed differently seem to make no difference to George's argument. Investments from now on will only ever be measured in 12 year chunks - almost as if we are going pre-decimal.

EnglishMohican

Its all very well saying the FTSE100 is not the only index but I believe most people are told (I'm sure I have read it here) that the first step in investing should be a nice safe FTSE tracker. Get that established and then diversify into cleverer things.

Well my FTSE tracker has returned about 3% per annum over the last 12 years if you average the difference in its value now to its value when I invested it. As the FTSE index is at a roughly similar level (somewhat lower than when I bought it to be pedantic) the increase is presumably due to the dividends added to it as it went along.

I have also had some money in an investment bond with a wealth management company for about 3 years split between 6 different well known fund managers and includes EM funds, US funds etc. The best fund has returned an effective 3.9% per annum while the poorest has returned nothing.

My Cash ISA is currently delivering 4% per annum fixed with total certainty and I can get at the money if I have to.

I may have been lucky in some ways and unlucky in others but I think the OP's original question is reasonable. Is it, at this time, worth the amateur investor investing in the stock markets (of the world) or should I stick to cash?

Having read right through the thread, I now feel like a minor rant of my own.

I remember the oft quoted advice to leave share investments in for at least 5 years (to allow for the odd bad year). Those of you talking about 30 year periods may be factually correct but do not do anything to convince me that I want to invest if you are so uncertain of success that you need to invoke a period 6 times longer than the old standard.

Similarly, I think that suggesting diversification is an admission of defeat. Its really the same thing as saying that one good bet cannot be chosen so take lots of bets and hope that one succeeds to cover the losses on the others. That may be realistic but it is not a sign of the skill of the financial industry, be that fund managers or IFAs.

I really feel that with charges as high as they are (just been quoted 3% initial and 1% annual for managing my SIPP) and with a good share dividend around 6%, then stock picking is the only way forward. If only I knew how to do it!

[rant mode off]!

jimjames

EnglishMohican wrote: »

Itve to.

I may have been lucky in some ways and unlucky in others but I think the OP's original question is reasonable. Is it, at this time, worth the amateur investor investing in the stock markets (of the world) or should I stick to cash?

That is a very good point and one that I think is very easy to answer - yes! 12 years ago may have been a peak which is/was very clear from the P/E ratio at the time. Now certainly isnt a peak and I would suggest is a good time to buy to build up a portfolio of companies at very reasonable prices. Just because a specific time period has done badly doesnt mean other time periods will also do so.