The Stock Market Takes Another Dive - Steer Clear ?

DiggerUK

GeorgeHowell wrote: »

...........let's repeat the old mantra one more time : the FTSE100 is still well below its 1999 peak.

Investing dividends back in to winners, would have proved positive for an investor since 1999.

Investing in losers, or putting dividends back in to losers, would have been of no benefit.
All arguments, about the upside of the enigmatic holy grail of a 'balanced portfolio' refuse to take in to account the negative effect.

One aspect of 'balanced portfolio' spin that is never addressed, is the devaluation of the capital base of a portfolio over that time frame.
Running a £1000 of value in 1999, through the BOE Inflation Calculator, and adding on this last years RPI, shows that you would need a valuation nearly 50% higher today.
And a FTSE at 10300+
..._

rockitup

GeorgeHowell wrote: »

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.

But there are quite clear warnings that the value of your investments may go down as well as up... not sure what else the warning would need. Even the value of cash in deposit accounts is eroded over time.

I retired early from my job but till have 12 years to go until state retirement pension age. I still have up to 80% of readily available net worth invested in markets from time to time. The pittance paid in bank account does push me into investing a larger %age than I wanted to.

Each to their own basically

sabretoothtigger

Asia Pacific is far better then FTSE basically

barak

GeorgeHowell wrote: »

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.

But George - not all stocks are down and you seem to be obsessed with the FTSE100 Index which - as has been said - is not the best index to track in any case.

I have never bought a tracker of any sort and don't intend to. The alternative is not just a gamble. Consistent active fund managers can be found with a little research. It was hardly a secret as long ago as the late 1990s that Neil Woodford was one of those who could achieve longer term consistent performance. My £6000 1998 Perpetual High Income Fund PEP is currently valued at £39,136.13 and I'm not switching any of it!

Other managers that have produced outstanding performance for me over the years have included William Littlewood when managing Jupiter Income Fund, Anthony Bolton when managing Fidelity European Values plc and Fidelity Special Situations UT and Bill Mott when with Credit Suisse Income Fund; two team leaders still in place are Aberdeen's Far East/Asian expert Hugh Young and Mark Mobius of Templeton Emerging Markets Investment Trust which has recently become by far my largest shareholding - and I'm not selling.

MrMalkin

GeorgeHowell wrote: »

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.

You can't be serious. You doubt such data exists?

All you have to do is look at the FTSE 100 Total Return index:
http://www.bloomberg.com/quote/TUKXG:IND

To make it super easy for you, let me spell it out:

FTSE 100 Total Return 30/12/1999: 3,141
FTSE 100 Total Return 12/04/2012: 3,907

So not only did dividends 'substantially offset' the 20% decline of the FTSE, they actually provided a nominal 24.4% increase over that time. You're clearly not in a position to be able to dispense advice on this subject if you can't even get your basic facts straight.

MrMalkin

DiggerUK wrote: »

All arguments, about the upside of the enigmatic holy grail of a 'balanced portfolio' refuse to take in to account the negative effect.

One aspect of 'balanced portfolio' spin that is never addressed, is the devaluation of the capital base of a portfolio over that time frame.

Another load of tripe, since advocates of balanced portfolios have continually addressed both of these points, you just refuse to listen or pay attention.

Ilya_Ilyich

MrMalkin wrote: »

You can't be serious. You doubt such data exists?

All you have to do is look at the FTSE 100 Total Return index:
http://www.bloomberg.com/quote/TUKXG:IND

To make it super easy for you, let me spell it out:

FTSE 100 Total Return 30/12/1999: 3,141
FTSE 100 Total Return 12/04/2012: 3,907

So not only did dividends 'substantially offset' the 20% decline of the FTSE, they actually provided a nominal 24.4% increase over that time. You're clearly not in a position to be able to dispense advice on this subject if you can't even get your basic facts straight.

This seems to back up his point then? 3907 today is like 2950ish in dec 1999 by CPI or 2700ish by RPI so even after dividends the FTSE100 is still a good bit below peak in real terms.

jimjames

Ilya_Ilyich wrote: »

This seems to back up his point then? 3907 today is like 2950ish in dec 1999 by CPI or 2700ish by RPI so even after dividends the FTSE100 is still a good bit below peak in real terms.

But George's argument is that the nominal value is lower than 1999 which is shown by these numbers to not be the case. As shown above just because he can't find the data doesn't mean it doesn't exist.

How much would £1000 in a savings account since 1999 be worth now? More or less than the FTSE values?

jimjames

GeorgeHowell wrote: »

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 ?

What you seem to be confusing is the state of the UK economy with the UK stock market. The two are not directly connected in the way you suggest and nearly 70% of the income for companies listed on the FTSE actually is generated outside the UK.

If you seriously think that no companies are going to do well in the future then stock up on tinned food and weapons as the future would be pretty dire. Personally I'd say that the companies that prosper in future may not be the same ones as are doing well now (for example Google didnt even exist as a listed company in 1999 and companies selling typewriters in 1900s aren't selling the same volume anymore) but companies will continue to generate profits unless we all become a communist state where that is banned.

pqrdef

jimjames wrote: »

How much would £1000 in a savings account since 1999 be worth now? More or less than the FTSE values?

Well the total return figures quoted above point to a 24% gain over 12 years. Clearly it's been possible to do much better than that at the building societies, especially as most of the period was before the advent of the 0.5% Bank Rate.

A statistic would be hard to come by because it would have been necessary to move the money around a bit, not just leave it stuck in one account. Also, it's not clear whether you would compare with fixed-term or instant-access rates. Shares are instant-access, but with the possibility of a big penalty of you have to sell at the wrong time, so it's hard to compare like with like.