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The Stock Market Takes Another Dive - Steer Clear ?
Comments
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If you use 10 years then the FTSE is still 10% above where it was then (without dividends) but again this is only the FTSE index for the UK market. Many other markets are significantly higher than 10 years ago and most advice is to spread your investments so you wouldn't just have an investment in the FTSE100 index.
And that's not to mention the added return that pound cost averaging, value averaging, and rebalancing would have brought over that period.GeorgeHowell wrote: »Realistically the FTSE100 trend over 12 years knocks away the very foundations of the hitherto major selling point for equities, along the lines of : "In any given ten year period since 1900 .. etc". But we still hear the propaganda that small investors should put the majority of their funds into equities for the long term.
The 70s were a terrible decade for buying stocks because they went nowhere that decade, indeed some markets suffered negative real returns over that period (unlike the FTSE over the last 10-12 years). Does that mean it was a mistake to buy equities then? No, because anyone who did built up a nice little portfolio just in time for the 20 year bull market of the 80s and 90s.
GeorgeHowell, what do you think people should be investing in at the moment, if not stocks?0 -
It only takes a crude understanding of valuations, just looking at P/E ratios to see why the FTSE is now lower than it was in 1999.
At a P/E of around 10 I dont think there is a danger of the FTSE being lower in 10 years unless our country is in serious trouble.Faith, hope, charity, these three; but the greatest of these is charity.0 -
And that's not to mention the added return that pound cost averaging, value averaging, and rebalancing would have brought over that period.
£100pm in L&G UK100 index fund for 10 years would now be worth £14,917. £100pm in cash would be £13,363. There were three periods in that time (ignoring the first couple of years where you expect it) where cash was better.
The sector average for 40-85% share sector (used to be called balanced) gave £15,898 as the figure. That is probably a more realistic benchmark as single sector investing in the FTSE100 is just bad investing.
Switching to investing a single amount 10 years ago, the FTSE100 tracker is just a few pounds behind cash deposits by 4%. A couple of weeks ago it was ahead. It is that borderline. The 40-85% sector average has almost doubled the cash return and has exactly doubled the FTSE100 tracker returnI am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
BP is doing rubbish as a share really. It should have recovered by now but I guess they have to clear this case.
Its 5 PE ? Bad share but good value if the company is capable of improving or at least benefiting from higher oil price. Downside target 434At a P/E of around 10 I dont think there is a danger of the FTSE being lower in 10 years unless our country is in serious trouble.
FTSE could be lower in ten years. Its unlikely not because the companies are so great but the currency is so weak. ( The country is in serious trouble) FTSE isnt our country, hence it should rise as our currency falls
Trackers can make alot of money if you buy on the lows and sell on the highs. But just holding and hoping it will rise is a ton less profitable, most activity is the former
Profit will be nominal not value or life changing; markets in total will effectively be sideways; much like previously
Since 1990 all UK money halved in value, so FTSE at 2000 in 1990 seen here is at least 4000 in comparison now; hence my conclusion we will repeat this effect0 -
George
Your post count shows you have been a regular poster on these boards for some time, yet your comments here look as if they've come from a first time poster who's just read some article in the Daily Mail about how poor investments are.
Several people have mentioned the point of Dividend income, yet you just don't seem to get it. The FTSE100 represents the 100 biggest companies in the UK, most of whom are not going to set the world alight in terms of growth, they are on the whole, steady established blue chip companies who pay a reasonable dividend. Most investors will buy shares in these companies for the dividend. If you are looking for growth you would tend to consider companies outside the FTSE100 (a huge generallisation, but bear with me). I own a portfolio of mostly FTSE100 companies and my current 'personal' weighted average dividend is 5.19%. That's based on what I paid for the shares, not their current share price and I intend holding these shares for the next 30 years, so if the FTSE100 drops by 300 points, or even 1000 points, do I care? not realy, only that it's a great oportunity to top up my portfolio at bargain prices.
Now if I put my money in cash Isas, which I do also, and currently have oever 50K in such, I do this on a rolling 3 year fix and am currently averaging about 4.2% (so better than most would acheive in cash Isas), but I am getting 5.19% average on the money I put into shares and the prospect of some capital growth. In cash, there is no capital growth.
So, to sum up, a 300 point drop, doesn't concern me in the slightest, in fact I have been merrily buying this week.
R0 -
You seem to be switching arguments to suit your case. On the one hand 10 years is an appropriate unit but on the other 12 years is better as it proves your point more.
If you use 10 years then the FTSE is still 10% above where it was then (without dividends) but again this is only the FTSE index for the UK market. Many other markets are significantly higher than 10 years ago and most advice is to spread your investments so you wouldn't just have an investment in the FTSE100 index.
If we are to exclude dividends because they are unquantifiable then you might as well exclude interest on savings accounts as they are equally variable and unquantified. On that basis even an investment in the FTSE over the last 10 years and all its ups and downs would still have beaten cash in a savings account by 10%. I'd say that was a pretty good reason that equities are worthwhile long term.
My point is that if the capital value of stocks can be so far down over 12 years, then the perception that over the long term they must be the best bet does not hold good. Over 10 years they're up, over 12 years they're down -- so what about 15 years, or 20, or 30 ? The answer is that nobody knows, it's a gamble. But it's not painted as such by the financial services industry.No-one would remember the Good Samaritan if he'd only had good intentions. He had money as well.
The problem with socialism is that eventually you run out of other people's money.
Margaret Thatcher0 -
And that's not to mention the added return that pound cost averaging, value averaging, and rebalancing would have brought over that period.
The 70s were a terrible decade for buying stocks because they went nowhere that decade, indeed some markets suffered negative real returns over that period (unlike the FTSE over the last 10-12 years). Does that mean it was a mistake to buy equities then? No, because anyone who did built up a nice little portfolio just in time for the 20 year bull market of the 80s and 90s.
GeorgeHowell, what do you think people should be investing in at the moment, if not stocks?
For most people of modest means and not in a position to lose much, if any, of their capital - mainly cash.No-one would remember the Good Samaritan if he'd only had good intentions. He had money as well.
The problem with socialism is that eventually you run out of other people's money.
Margaret Thatcher0 -
It only takes a crude understanding of valuations, just looking at P/E ratios to see why the FTSE is now lower than it was in 1999.
At a P/E of around 10 I dont think there is a danger of the FTSE being lower in 10 years unless our country is in serious trouble.
But it is in serious trouble isn't it :- overpopulated and overcrowded, huge unsustainable debt, vastly overblown public spending with cuts resisted by all sorts of vested interests, subject to whatever horror story may emerge when the doomed Euro fiasco finally meets its nemesis, subject to uncontrollable price shocks on oil and energy in particular ....... need I go on ?No-one would remember the Good Samaritan if he'd only had good intentions. He had money as well.
The problem with socialism is that eventually you run out of other people's money.
Margaret Thatcher0 -
George
Your post count shows you have been a regular poster on these boards for some time, yet your comments here look as if they've come from a first time poster who's just read some article in the Daily Mail about how poor investments are.
Several people have mentioned the point of Dividend income, yet you just don't seem to get it. The FTSE100 represents the 100 biggest companies in the UK, most of whom are not going to set the world alight in terms of growth, they are on the whole, steady established blue chip companies who pay a reasonable dividend. Most investors will buy shares in these companies for the dividend. If you are looking for growth you would tend to consider companies outside the FTSE100 (a huge generallisation, but bear with me). I own a portfolio of mostly FTSE100 companies and my current 'personal' weighted average dividend is 5.19%. That's based on what I paid for the shares, not their current share price and I intend holding these shares for the next 30 years, so if the FTSE100 drops by 300 points, or even 1000 points, do I care? not realy, only that it's a great oportunity to top up my portfolio at bargain prices.
Now if I put my money in cash Isas, which I do also, and currently have oever 50K in such, I do this on a rolling 3 year fix and am currently averaging about 4.2% (so better than most would acheive in cash Isas), but I am getting 5.19% average on the money I put into shares and the prospect of some capital growth. In cash, there is no capital growth.
So, to sum up, a 300 point drop, doesn't concern me in the slightest, in fact I have been merrily buying this week.
R
The left loves to try to use the term Daily Mail as an insult. Although I don't read it, I don't share the perception so that sort of snipe goes over my head.
I do get the point about dividends, but nobody really knows. Whereas savings rates are a matter of record, average or cumulative dividends based around the FTSE100 appear not to be. Where I have repeatedly said that I have doubts as to whether reinvested dividends would have substantially offset the 20% drop in the index over 12 years, nobody can come up with hard data to prove it. So I doubt that such data exists. Its an act of faith to assume that dividends are the answer. And even if dividends did offset the capital loss I question whether the capital risk would be worth it to the average, unsophisticated, non financially savvy punter.
It's not those of you who are buying and selling individual shares, or even regular ISA funds, that these remarks are aimed at. You can look after yourselves. What I object to is the way that the financial services industry targets the average, unwary, John & Jane Doe, and gives them all this B/S about how wonderful equities are, whilst the warnings about value going up and down and past performance not being a reliable indicator are in microscopic print at the bottom of the last page. We know that many of them don't give a monkey's as long as they make a sale and get commission. It's not the likes of the generally savvy people on this forum that they are after suckering in, it's the "muppets".No-one would remember the Good Samaritan if he'd only had good intentions. He had money as well.
The problem with socialism is that eventually you run out of other people's money.
Margaret Thatcher0 -
Well, not terribly scientific, but if I plot L&G Index tracker ACC vs INC on trustnet since launch (about 7 years), INC has gained 4.3% and ACC has gained 28.4%. Tracker does have costs which will drag it below the index, but I assume the main difference between these two would be due to the reinvested dividends0
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