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gadgetmind wrote: »No-one is assuming the future will follow the past, just that it will be the same mixed bag over multi-decade periods, with some of those periods being deeply grim and others less so.
However, if equities are doomed (doomed, I tell you!) then you need to choose a mix of assets that you think are more appropriate for the forthcoming nothing-like-the-past future.
What would you choose?
What I would choose would be to suit my particular personal profile, circumstances, and attitude to risk. So it's not relevant to everyone else. the problem is that the financial services industry almost always points almost everyone towards equities as the major component of their investments. The only "justification" for this is history which does not hold good for reasons already stated.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: »What I would choose would be to suit my particular personal profile, circumstances, and attitude to risk.
Maybe you need to start a new thread and provide the background info. Of all of those, attitude to risk is the hardest to judge as people are irrational beasts.the financial services industry almost always points almost everyone towards equities as the major component of their investments.
It depends on many factors and there are many assets classes. For people who are young, need growth, and can accept volatility, a big slug of equities is best. For those with grey hair and dodgy eyes, you need a lot more fixed interest and property. And yes, you also need some cash, but too much is a recipe for disaster.The only "justification" for this is history which does not hold good for reasons already stated.
I would argue that history (recent and ancient!) tells us that this does hold good for reasons already stated.
If you have a personal distrust of equities, and don't want them in your portfolio, then that's fine: no-one has a gun to your head. What assets are you going to hold instead? What does firecalc say you can safely drawdown based on it one and a half centuries of backtesting data? If you think this backtesting doesn't cover the likely scenario for the next 30 years, state why.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »Maybe you need to start a new thread and provide the background info. Of all of those, attitude to risk is the hardest to judge as people are irrational beasts.
It depends on many factors and there are many assets classes. For people who are young, need growth, and can accept volatility, a big slug of equities is best. For those with grey hair and dodgy eyes, you need a lot more fixed interest and property. And yes, you also need some cash, but too much is a recipe for disaster.
I would argue that history (recent and ancient!) tells us that this does hold good for reasons already stated.
If you have a personal distrust of equities, and don't want them in your portfolio, then that's fine: no-one has a gun to your head. What assets are you going to hold instead? What does firecalc say you can safely drawdown based on it one and a half centuries of backtesting data? If you think this backtesting doesn't cover the likely scenario for the next 30 years, state why.
We are not going to agree on whether the lessons of the past necessarily hold good for the future in this ever-changing environment.
But I would urge potential investors -- especially those with grey hair and dodgy eyes -- to be sceptical when this argument is levied at them by the financial services industry. We have seen far too many examples of dubious practices to be complacent or trusting.And there is no doubt in my mind that financial advice given, whether tied or not, may sometimes represent first and foremost the best interests of those giving it.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: »We are not going to agree on whether the lessons of the past necessarily hold good for the future in this ever-changing environment.
The past has been as ever-changing as the future is sure to be. We never know which asset class will perform best over the next year, or the next decade, but we do know that a balanced portfolio is safer than holding just one asset class. We also know that equities have better long-term total return at the expense of short/mid term volatility.But I would urge potential investors -- especially those with grey hair and dodgy eyes -- to be sceptical when this argument is levied at them by the financial services industry.
What argument and what's the practical conclusion of the counter-argument?
But yes, those with shorter investment horizons need to look at more fixed interest and less equities (and there are also other asset classes they may want to consider) but they need to be aware that playing it too safe can be very dangerous.
I can recommend reading "The Intelligent Asset Allocator" by William Bernstein if you want to understand this better. In fact, if you haven't yet read it and/or don't intend to, then perhaps there is little point in continuing this discussion.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »The past has been as ever-changing as the future is sure to be. We never know which asset class will perform best over the next year, or the next decade, but we do know that a balanced portfolio is safer than holding just one asset class. We also know that equities have better long-term total return at the expense of short/mid term volatility.
What argument and what's the practical conclusion of the counter-argument?
But yes, those with shorter investment horizons need to look at more fixed interest and less equities (and there are also other asset classes they may want to consider) but they need to be aware that playing it too safe can be very dangerous.
I can recommend reading "The Intelligent Asset Allocator" by William Bernstein if you want to understand this better. In fact, if you haven't yet read it and/or don't intend to, then perhaps there is little point in continuing this discussion.
The fact that you now drop into a patronising tone does nothing to further the argument, and frankly only casts doubt on your own confidence in the points that you are making.
I take issue with "equities have better long term return". "Have had better ..." would be more accurate, since as you acknowledge nobody knows what will happen in the future. Of course a widely spread portfolio will hedge the bets, and if equities were kept to a modest proportion of it then for most people that might be sensible.
I find it difficult to credit that you ask "what argument ?" (perhaps you would do better to read the posts carefully rather than waffling on about obscure books that we haven't read). I'll spell it out again :-
Equities may well not perform as they have done in the past because the world has changed substantially in recent decades.
Nevertheless the financial services industry tends to push people towards equities, disproportionately in many cases, perhaps because it has a vested interest in doing so and doesn't have much else to offer.
Savers/investors should therefore beware what they are advised, especially those too old to stand much chance of recouping substantial losses of capital.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 fact that you now drop into a patronising tone does nothing to further the argument
My goal is to educate rather than offend and I apologise if it doesn't come across that way to you.
Over the long-term, we can have a high degree of certainty.I take issue with "equities have better long term return". "Have had better ..." would be more accurate, since as you acknowledge nobody knows what will happen in the future.
What would you call a modest proportion for a 25 year old? What about a 55 year old? What else would you have in the portfolio?Of course a widely spread portfolio will hedge the bets, and if equities were kept to a modest proportion of it then for most people that might be sensible.
Sorry, but I have read it, and it's a long way from being obscure. I strongly recommend you do read it, and perhaps also The Intelligent Investor by Benjamin Graham.waffling on about obscure books that we haven't read.
Whereas it didn't change at all between 1871 and 2000? Really? All those wars, depressions, crashes, sovereign defaults, missile crisis, etc., these were all part of some halcyon era for equities?Equities may well not perform as they have done in the past because the world has changed substantially in recent decades.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »My goal is to educate rather than offend and I apologise if it doesn't come across that way to you.
Over the long-term, we can have a high degree of certainty.
What would you call a modest proportion for a 25 year old? What about a 55 year old? What else would you have in the portfolio?
Sorry, but I have read it, and it's a long way from being obscure. I strongly recommend you do read it, and perhaps also The Intelligent Investor by Benjamin Graham.
Whereas it didn't change at all between 1871 and 2000? Really? All those wars, depressions, crashes, sovereign defaults, missile crisis, etc., these were all part of some halcyon era for equities?
I don't need educating on these topics -- others might, which is why the discussion is best kept objective. I have read many offerings on investment strategies over the years and none offer the holy grail of guaranteed high returns with low risk, so I seldom read them any more. If these people had all the answers then they would be living the life of Riley in the Bahamas, not writing books. The very few who are very wealthy and still do write books have reached the point where they can afford to lose vast amounts, and theirs are not the sort of strategies that the ordinary punter should be attempting to follow.
That we can have a high degree of certainty about the next 100 years of equity performance following the last 100 years has to be pure speculative opinion, and not one that I nor many other share.
Recommended equity proportions cannot really be generalised but I don't believe anyone (even young, wealthy, high risk tolerance) should be at more than 50% in the present climate, and for almost any 55 year old no more than 20-25%. The perception that for older people to be in less capital risky areas (cash, bonds/gilts, maybe property) is "dangerous" does not have any logical basis. For a low/medium risk tolerance retiree of moderate to affluent means, the risk of inflation erosion of capital (effectively an annual capital drawing) is far less than the risk of substantial, possibly unrecoverable capital loss due to the vagaries of stock markets and exchange rates.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 don't need educating on these topics
Hmmmm.I have read many offerings on investment strategies over the years and none offer the holy grail of guaranteed high returns with low risk
No, of course they don't. In fact, good books will explain why this can't be done and why you shouldn't therefore even try.If these people had all the answers then they would be living the life of Riley in the Bahamas, not writing books.
Warren Buffett describes The Intelligent Investor as "the best book about investing ever written" and credits Benjamin Graham with inspiring his approach to investing.Recommended equity proportions cannot really be generalised but I don't believe anyone (even young, wealthy, high risk tolerance) should be at more than 50% in the present climate, and for almost any 55 year old no more than 20-25%.
OK, let's go for a portfolio with 25% equities. Add 25% of gold, 25% cash and 25% gilts and you have a Harry Browne portfolio. What drawdown rate do you feel is safe for such a portfolio over a 30 year period and how is this figure calculated?
Use a different portfolio construction if you like.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »Hmmmm.
No, of course they don't. In fact, good books will explain why this can't be done and why you shouldn't therefore even try.
Warren Buffett describes The Intelligent Investor as "the best book about investing ever written" and credits Benjamin Graham with inspiring his approach to investing.
OK, let's go for a portfolio with 25% equities. Add 25% of gold, 25% cash and 25% gilts and you have a Harry Browne portfolio. What drawdown rate do you feel is safe for such a portfolio over a 30 year period and how is this figure calculated?
Use a different portfolio construction if you like.
Oh dear, more patronisation. You appear to be one of these internet posters who likes to colour a discussion with playing the ball and not the man (albeit verbal caution not yellow or red card stuff in your case) in the attempt to discredit the opposition. It is possible for people to disagree on matters of opinion and speculation without one of them necessarily being ignorant or stupid.
It is not difficult to construct a portfolio that does not guarantee high returns and low risk. That's what the vast majority of people end up with and you don't need books to achieve it.
The mention of Warren Buffet rather proves my point from the previous post.
By the way I would not touch gold with a barge-pole, even more unsuitable for the average punter than large swathes of 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: »You appear to be one of these internet posters who likes to colour a discussion with playing the ball and not the man
Nope.It is not difficult to construct a portfolio that does not guarantee high returns and low risk. That's what the vast majority of people end up with and you don't need books to achieve it.
Agreed, but reading the right books helps you avoid it. This is why I have both recommended good books on asset allocation and tried to describe the basics.By the way I would not touch gold with a barge-pole, even more unsuitable for the average punter than large swathes of equities.
It has a role in a balanced portfolio as do equities.
Perhaps you might take a look at the portfolios of Personal Assets Trust and/or Ruffer to see this in action?
http://www.hl.co.uk/funds/fund-news-and-investment-ideas/fund-news--and--alerts/archive/trojan-fund-personal-assets-trust-research-updateI am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0
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