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The Stock Market Takes Another Dive - Steer Clear ?
Comments
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Guys - reinvesting divis in a declining market is essentially increasing ones holdings in the hope that stock prices increase to at least the accumulated value of your investment. Reinvesting divis does not of itself guarentee growth
Foreign & Colonial Investment Trust has increased it annual dividend payout for the past 42 years. So even if the stock price had fallen the reinvested dividend would bought more stock at a higher yield.
If you had bought BP when it first denationalised and followed the same plan as above. You be showing a healthy gain despite recent troubles.0 -
If you are retiring today the annuity or drawdown will suffer. That surely, in essence, is what GH is alluding to in the title of his thread.
Nice to see you've finally grasped the concept of total return. Anyone at or close to retirement should have a portfolio that is configured for the lower risk tolerance that such a time in life requires. That usually means they should have a much higher bond allocation, but they should still own some stocks.
Why is it that the people in this thread who are critical of investing in stocks don't seem to understand even the most basic tenets of portfolio management?Mr Malkin specifically states he is reinvesting the divis.
Unfortunately you don't seem to be able to make a consistent argument, the fact that I personally reinvestment my income doesn't mean Aegis is wrong.0 -
All investments are a gamble, including gold and cash in a savings account. Taking too little risk is just as bad for performance as taking too much.
For about the millionth time in this thread, let me repeat: you can diversify away a lot of risk buy exposing yourself to other stock markets and other asset classes (as dunstonh's example 'balanced' portfolio showed). You can take advantage of volatility by using various portfolio techniques such as PCA and rebalancing.
Pointing to a very specific time period which just happens to start at the very peak for a single asset class, whilst ignoring all these other factors, is moronic. Nobody is arguing that people should invest in the FTSE and nothing else.
I think we can do without all the hyperbole ("millionth time") and insults ("moronic"). Frankly you just show yourself up with that sort of nonsense.
Regarding the issues : taking too little risk is not an absolute and depends on the individual, their situation, and their attitude to risk. The blanket "equities are best" industry pays far too little attention to such matters as they are inconvenient when it comes to maximising sales and commission.
As others have said, the holy grail of the balanced portfolio which yields maximum gain is rarely achieved and when it is it's usually down to good luck. The vats majority of investment managers cannot beat the index and the index has underperformed for 12 years.
The very specific period of time happens to be that between the all time peak and the FTSE 100 index, and now. I would have thought that was a very relevant period of time for people to consider, however inconvenient for those preoccupied with trying to maximise sales and commission by selling equities.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 -
GeorgeHowell wrote: »I think we can do without all the hyperbole ("millionth time") and insults ("moronic"). Frankly you just show yourself up with that sort of nonsense.
Regarding the issues : taking too little risk is not an absolute and depends on the individual, their situation, and their attitude to risk. The blanket "equities are best" industry pays far too little attention to such matters as they are inconvenient when it comes to maximising sales and commission.
As others have said, the holy grail of the balanced portfolio which yields maximum gain is rarely achieved and when it is it's usually down to good luck. The vats majority of investment managers cannot beat the index and the index has underperformed for 12 years.
The very specific period of time happens to be that between the all time peak and the FTSE 100 index, and now. I would have thought that was a very relevant period of time for people to consider, however inconvenient for those preoccupied with trying to maximise sales and commission by selling equities.
I disagree, Mr Malkins post is quite on the mark IMHO. It may be hyperbole, but that doen't make it untrue.0 -
Why is it that the people in this thread who are critical of investing in stocks don't seem to understand even the most basic tenets of portfolio management?
We do understand it but we don't regard the conventional wisdom of 'portfolio management' as being optimal, in this ever changing and volatile world world. The old adage of :- some in shares, some in bonds, some in commodities, some in cash etc , preferably using an IFA who knows best and who can save you from all the irksomeness of it all, doesn't really deliver. The exceptions might be the lucky few who pick some winners, and the very wealthy who have enough money to make sure that they make more money. Otherwise it's probably people who have the imagination and courage to think out of the box who will make the killings nowadays, not those who follow the tired old homilies of the past. For the rest of us it's best to play safe, sit tight, and hope for the best.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 -
GeorgeHowell wrote: »
The very specific period of time happens to be that between the all time peak and the FTSE 100 index, and now. I would have thought that was a very relevant period of time for people to consider, however inconvenient for those preoccupied with trying to maximise sales and commission by selling equities.
The very specific period begins with the absolute worst (with hindsight) point to invest in the FTSE100, and as has been demonstrated in this thread, it hasn't been all that bad.
Given that most people's investment focus is for retirement, why is 12 years a relevant period? I would have thought 40 years, 30 years, 20 years, 10 years, 5 years would all be as relevant. How are they shaping up?
Have you worked out what the implications of pound-cost averaging are yet?
Strange as it may seem, DIY investors like myself are in favour of equities because they are the best asset class for meeting long-term goals.0 -
GeorgeHowell wrote: »As others have said, the holy grail of the balanced portfolio which yields maximum gain is rarely achieved and when it is it's usually down to good luck. The vats majority of investment managers cannot beat the index and the index has underperformed for 12 years.
Which index are you referring to? This is quite important, as the one being talked about here is specifically the FTSE100, so a manager would have to be constrained to investing in FTSE100 companies for this particular statement to hold, which a balanced manager isn't. Even if you assume that he can't beat the individual indices for the sectors he invests into, "the index" in this case has to be a blend of a number of different markets, not just the FTSE100.
As such, the constant referrals to the FTSE in this thread are largely irrelevant when the average balanced portfolio would have a weighting towards the FTSE 100, 250 and Smaller Company/AIM shares, along with corporate bonds, gilts, international equities and property. I can guarantee that this composite index will have had a considerably different track record than the FTSE.The very specific period of time happens to be that between the all time peak and the FTSE 100 index, and now. I would have thought that was a very relevant period of time for people to consider, however inconvenient for those preoccupied with trying to maximise sales and commission by selling equities.
Why would you consider that to be so relevant? Do you consider us to be at such a peak now, and are you therefore trying to demonstrate that buying now is likely to be a mistake (rather than the more optimistic thoughts I've seen recently based on current P/E levels in UK companies)? Or is this purely showing the problem with over-exuberance and bad pricing models, in which case there are much more likely candidates for bubbling assets than the FTSE at present? Or possibly you're arguing that investing a single lump sum at any time can be dangerous and are suggesting that people should pound-cost average?
It's really tricky trying to spot where you're coming from, but if the data from the highest point ever is relevant, why not show the data from the lowest point since inception as well for comparison? If one of those data sets is relevant, surely the other must be as well?I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
GeorgeHowell wrote: »We do understand it but we don't regard the conventional wisdom of 'portfolio management' as being optimal, in this ever changing and volatile world world. The old adage of :- some in shares, some in bonds, some in commodities, some in cash etc , preferably using an IFA who knows best and who can save you from all the irksomeness of it all, doesn't really deliver.
Your first few posts were specifically just about equities, but now a portfolio of bonds shares commodities and cash "doesn't really deliver". Do you have any non-anecdotal evidence of this?
What would you suggest investing in if shares, bonds, commodities and cash are all no good?The exceptions might be the lucky few who pick some winners, and the very wealthy who have enough money to make sure that they make more money. Otherwise it's probably people who have the imagination and courage to think out of the box who will make the killings nowadays, not those who follow the tired old homilies of the past. For the rest of us it's best to play safe, sit tight, and hope for the best.
Who's suggesting it's about "making a killing"? Surely most people invest purely to be able to provide themselves with a certain standard of living in retirement.
Can you explain what you mean by playing safe? I also think advising people to "hope for the best" is a relatively irresponsible thing to do.0 -
So why don't we all just buy Berkshire Hathaway, job done?and people like Warren Buffett wouldnt be one of the richest men on earth."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
So why don't we all just buy Berkshire Hathaway, job done?
Well nowadays he has far too much money to get super returns as in the past, he's limited to only very large cap companies.
20-30 years ago, yes it would have been a great investment, but you'd still have to analyse his company and make sure you paid a fair price for it.Faith, hope, charity, these three; but the greatest of these is charity.0
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