The Stock Market Takes Another Dive - Steer Clear ?

Aegis

GeorgeHowell wrote: »

What I am criticising is how much of the financial services industry tries to point the unwary into products which are best for them (the sellers) and not necessarily the best for the customers. Broken record or not, here it is again -- the FTSE index is the big indicator because it comprises about 80% of total UK quoted equity, and being 20% below its 1999 peak it has (at best) flattened out and is not the ever-growing beast that the financial services industry would like the unwary to believe that it is.

This is still wrong, largely because it fails to take into account the fact that 12 years ago the FTSE was heavily influenced by tech companies which artificially inflated its value far above where it should have been. Rather than being a slow and steady set of large caps with low growth prospects but good dividends (which is actually what it is generally described as, not as an ever-growing beast), it was filled with companies that were in there purely because of investor frenzy.

As such, you're taking an aberration and insisting that this describes the entire equity market, which is just not logical. Hence I asked the question of why you looked only at the worst drawdown in the history of the index rather than the best growth period of the index. It makes no sense to look at the collapse of a bubble and to essentially claim that all equities are tainted as a result of speculation, and even if it does in your mind you must have a reason why the maximum loss is more relevant than the maximum gain.

Personally I don't see any comparison between the FTSE 12 years ago and now. There's nothing being bought up madly in the equity world at the moment, P/E ratios are generally very low even for companies with strong balance sheets, people aren't generally rushing out to buy any one company based solely on the promise of huge returns in future (well, maybe some AIM shares, but they're another story altogether).

I've tried asking you a few questions as to where you're coming from with these comments, but you appear to have missed them...

Waffle on all you like about balanced portfolios, and other classes on investments, and foreign stocks etc, but the fact remains that UK equities are the bedrock of it all and they no longer can be said to be indisputably the best bet.

Hardly the bedrock of it all, actually. A typical balanced portfolio fund I googled currently has a little over 25% in UK equities, which will certainly not all be in the FTSE 100. Maybe 15% exposure to the FTSE or its constituents. I can't really contemplate referring to that as the bedrock of the balanced portfolio.

Thrugelmir

jimjames wrote: »

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.

With consumers on the whole keeping their hands in their pockets and Western governments cutting back. Where is the growth going to from.

If Europe catches a cold then Asia is going to sneeze.

Radiantsoul

EnglishMohican wrote: »

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.

[rant mode off]!

Diversification is not an admission of defeat, but rather a way of reducing risk when two assets are not perfectly correlated. By adding more classes of asset you can get a higher return for the same given rate of risk.

Aegis

EnglishMohican wrote: »

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.

Medium-high risk in my book. Certainly not safe. It's a single geographic area and asset class, with a strong weighting towards a very limited number of equity sectors. When I've seen people here recommending a FTSE tracker, it's usually because of charges, not safety.

The FTSE is generally made up of large companies not growing particularly fast but paying a decent dividend (obviously there are some growth stocks in there all the time, but they tend to be offset by the very established blue chips to at least some degree). However, the potential for things to go wrong and for the tracker to blindly follow the index into a bubble is certainly not a drawback to be ignored. That's not to say that a managed fund will automatically ignore it, but an index tracker would be failing to do its job if it didn't follow the growth and ultimate bursting of a bubble fairly closely. As such, it's a good tool for someone who is going to be looking at economic and investment conditions and adjusting their portfolio regularly.

I've recently set up a passive portfolio for a client who is very cost sensitive over all else. Even that consists of about 6 funds spanning a variety of asset classes and geographies, and I still wouldn't call it nice and safe.

dunstonh

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.

FTSE 100 trackers are not safe and not a sensible investment for a first time investor.

1echidna

MrMalkin wrote: »

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.

Are yes but perhaps he knows when a market is turning sour, unlike you.

EnglishMohican

dunstonh wrote: »

FTSE 100 trackers are not safe and not a sensible investment for a first time investor.

OK - so if a FTSE tracker is not safe (I'll make that "relatively safe" if I may) what is?

Gilts seem to be at a peak and I think they will drop and could do so sharply.

US shares are probably OK until after the election but somebody is going to have to sort out the US deficit - probably not doing any good to share prices when they do it. Europe is in the middle of sorting out its own deficit. There are very mixed views on China. South America may be OK but I cannot imagine you calling that safe.

Without wanting to put words in your mouth, maybe your point is that a collection of sensibly chosen shares (perhaps in a fund) are better than a tracker - but the charges on the more successful funds that I have looked at tend to be high in relation to the return that all but the occasional very successful one provides. Those charges reduce the return to a point where they are close to the best cash returns and it is pointless to take the risk of investing as opposed to saving.

If not shares, then perhaps corporate bonds and the like. Maybe --- but coping with them is getting a bit over my head and only the best returns (have I seen 10% quoted) are worth holding in a fund.

All of this is just my thoughts and opinions and I would be happy to learn better.

1echidna

The Magician Behind Iran's Vanishing Oil Tankers

1echidna

Oil market mulls Iran, infrastructure, politics

Chargem

1echidna wrote: »

Oil market mulls Iran, infrastructure, politics

Is there a reason you are posting lots of links about oil and Iran in this thread? Could you at least type some words into each post with why you are posting a particular link?