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The Stock Market Takes Another Dive - Steer Clear ?
Comments
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.....Why is it madness now? What crystal ball do you have.....I don't criticise investing, we did it prior to 2000. It's investing in markets now that is madness.
..._I don't know why. If I didn't get out of shares in 2000, I'm certainly not getting out now.......
The economic indicators are there for all to see.
My judgement, is that there is no easy or pain free way out of this crisis. Judgement is not a crystal ball.
Wealth is created from producing goods and trading that value creation. In case nobody has noticed, the contaction in industry and manufacturing is not a fantasy.
The fact that the capital value of the FTSE is nowhere near what it was in 1999, cannot be brushed under the carpet.
..._0 -
The economic indicators are there for all to see.
My judgement, is that there is no easy or pain free way out of this crisis. Judgement is not a crystal ball.
Wealth is created from producing goods and trading that value creation. In case nobody has noticed, the contaction in industry and manufacturing is not a fantasy.
The fact that the capital value of the FTSE is nowhere near what it was in 1999, cannot be brushed under the carpet.
..._
In many ways the prospects for capitalism and the world economy are fair better than they were in 1999 or 1989. For decades much of the world's population were locked out of markets. That position has now reversed with the people from China, India and South America beginning to see living standards rising very rapidly. Incomes in Africa are also rising. Ten years ago it was not obvious this trend was sustainable.
It is still quite early to see how this social change will play out, and how the gains from trade will be distributed. However it seems to me there is enough "catch up" potential in the now developing countries to propel worldwide economic growth for several decades without any new technical innovation.0 -
The fact that the capital value of the FTSE is nowhere near what it was in 1999, cannot be brushed under the carpet.
I don't know why you keep banging on about the 'capital value', since nobody has claimed that the capital value is supposed to keep up with inflation, only that over the long term, with dividends reinvested, shares remain a perfectly valid asset class to invest in.
The whole point of buying shares is to buy the stream of income that the dividends provide - historically the majority of the return (along the lines of 90%) inherent to shares has come from the dividend, not the capital growth. This is borne out, as I've shown, by the fact that the straight FTSE 100 is down 15-20% since 1999 but the FTSE 100 Total Return is up 24% over the same period. If you continue to wilfully ignore the return due to dividends then your argument remains completely flawed.
Also note that you focus exclusively on the FTSE to make your point. There are loads of other markets that have outperformed it, any decent investor will have had exposure to them - that's the whole point of a diversified portfolio.
Do you also complain that the capital value increase of bonds (almost 0%) or cash (definitely 0%) has failed to keep up with inflation?0 -
The capital value of the FTSE should mean that the index for the 100 be at 10300+, if inflation linked to 1999. It's a long way down on that figure, and a pensioner about to cash in their portfolio should not care!!!I don't know why you keep banging on about the 'capital value', since nobody has claimed that the capital value is supposed to keep up with inflation..... the straight FTSE 100 is down 15-20% since 1999 but the FTSE 100 Total Return is up 24% over the same period......
The bulk of their payments invested twixt then and now will also have been hit hard.
If total returns are only 24%, is that self same pensioner not supposed to care that they should have received nearer 50% to compensate for inflation shortfall?
Many tempted by financial industry promises in the past will have regrets at what they have done. But going forwards it is just madness to continue.
As the man said..."the first sign of madness is doing the same thing over and over again expecting a different result"
..._0 -
The capital value of the FTSE should mean that the index for the 100 be at 10300+, if inflation linked to 1999.
No it shouldn't. You're just being ignorant in repeating this over and over, your point is technically wrong and thus your argument completely flawed.If total returns are only 24%, is that self same pensioner not supposed to care that they should have received nearer 50% to compensate for inflation shortfall?
Again, you're ignoring the points that I and others have made around this. A pensioner would be exceedingly unlikely to have invested their entire pot right at the height of the peak. They would have invested over time both long before and long after the peak, and therefore received much higher returns due to PCA and rebalancing. They would also have been diversified into other asset classes such as other stock markets as well as bond funds - as dunstonh demonstrated out a diversified portfolio with regular investments beat cash by a handy margin, despite the fact that we're in one of the longest and worst stock bear markets.
I don't understand why you're being so wilfully pig-ignorant on this matter. It's really not rocket science.0 -
The capital value of the FTSE should mean that the index for the 100 be at 10300+, if inflation linked to 1999. It's a long way down on that figure, and a pensioner about to cash in their portfolio should not care!!!
The bulk of their payments invested twixt then and now will also have been hit hard.
I guess anyone who entered the market in 1999, has donated all their dividend income to charity and now is looking to cash in is probably unfortunate.0 -
The fact that the capital value of the FTSE is nowhere near what it was in 1999, cannot be brushed under the carpet.
..._
I guess it depends on your definition of "nowhere near".
5700 compared to 6900 isn't a great result but I'd also suggest it doesn't qualify as "nowhere near". Even with poor returns over the last 13 years (notice not decade) and some rollercoaster rides in between the capital value from peak is only just over 15% down now and with dividends is above.
Over other time periods it is actually much better. Now it is very easy to take specific time periods to prove that something is good or bad but even on the worst case scenario that doesnt seem a bad result to me. When people worry about "losing all my money" on the stock market and even a poor index tracker would be in positive territory with dividends and only down 15% looking at capital.
Take time periods of 10/15/20 years and the returns are very different.Remember the saying: if it looks too good to be true it almost certainly is.0 -
I don't know why you keep banging on about the 'capital value', since nobody has claimed that the capital value is supposed to keep up with inflation, only that over the long term, with dividends reinvested, shares remain a perfectly valid asset class to invest in.
The whole point of buying shares is to buy the stream of income that the dividends provide - historically the majority of the return (along the lines of 90%) inherent to shares has come from the dividend, not the capital growth. This is borne out, as I've shown, by the fact that the straight FTSE 100 is down 15-20% since 1999 but the FTSE 100 Total Return is up 24% over the same period. If you continue to wilfully ignore the return due to dividends then your argument remains completely flawed.
Also note that you focus exclusively on the FTSE to make your point. There are loads of other markets that have outperformed it, any decent investor will have had exposure to them - that's the whole point of a diversified portfolio.
Do you also complain that the capital value increase of bonds (almost 0%) or cash (definitely 0%) has failed to keep up with inflation?
On retirement, the annuity will be based upon the capital value of your pension pot. Therefore, for by far the majority of 'soon to be' pensioners, capital growth is the be all and end all.0 -
On retirement, the annuity will be based upon the capital value of your pension pot. Therefore, for by far the majority of 'soon to be' pensioners, capital growth is the be all and end all.
Dividend re-investment is incredibly easy, it's not some sort of black magic that only arcane masters can benefit from. For example my own portfolio consist exclusively of accumulation funds so all my dividend income is automatically re-invested with absolutely no effort on my part.
Total return is the be all and end all.0
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