A chat about the markets

TCA

BLB53 wrote: »

Markets appear to be range bound - ftse trading between 5,300 to 5,800. Until the problems with soverign debt and euro are resolved I suspect this will continue for some time - 2 or 3 years.

My strategy is to remain mostly in equities, but buy quality dividend yielding shares or investment trusts. The largest factor in any gains over the coming few years will be from dividends rather than capital appreciation.

Good article along these lines in FT today, worth a look.

If you had mostly cash holdings, would you be buying now? If so, what? My plan is to convert maturing fixed rate cash bonds into a few income producing investment trusts over the next couple of years and perhaps Vanguards emerging markets and All World ETFs but also wondering whether I should stay in cash a bit longer and watch what unravels globally in the next 24 months as I don't require the income right now.

gadgetmind

Reaper wrote: »

I think the larger European countries (Spain, Italy) are currently the biggest threat

True, but Spain, Italy and France were actually doing pretty well with their debt levels until their banks suffered from bad lending and then property bubbles, Portugal and Ireland too.

Without the threat of bank collapse, their yields should start coming back down, and they should be able to muddle through.

Greece is and always was a rule-breaking basket case. I can see no real alternative to them defaulting (again) and being chucked out of the Euro. I might be wrong, but TBH this is already priced in, and if banks elsewhere can be buffered, the effects could be localised.

An interesting question is whether insurers will be protected in any way. They are usually left to fend for themselves.

BLB53

If you had mostly cash holdings, would you be buying now? If so, what? My plan is to convert maturing fixed rate cash bonds into a few income producing investment trusts over the next couple of years and perhaps Vanguards emerging markets and All World ETFs but also wondering whether I should stay in cash a bit longer and watch what unravels globally in the next 24 months as I don't require the income right now.

I certainly would be buying (and am buying), Murray International, Bankers, Aberforth Smaller, Blackrock Commodities Inc., Temple Bar, British Assets and JP Morgan Midcap are a few I have been accumulating over the past few months.

I also like the Vanguard UK Equity Income Index but then you have to watch out for charges and custody fees.

Probably a good idea to drip your money into equities on a regular basis so as not to get caught out buying at the top of the current roller coaster ride.

Dividends would be the way to go imo, whether or not you need them - if not needed immediately, they can always be reinvested.

bigadaj

What I cant understand though is why QE isn't scaring very one silly, it's more debt to be paid at an unspecified date in the future, intentionally promoting inflation etc

Surely debt is debt whatever way you dress it up or what you call it.

srcandas

bigadaj wrote: »

What I cant understand though is why QE isn't scaring very one silly, it's more debt to be paid at an unspecified date in the future, intentionally promoting inflation etc

Surely debt is debt whatever way you dress it up or what you call it.

Why do you see QE as debt?

At the end of the day the UK, thank god, can print money. That weakens the pound thus making us more competitive and makes our debts smaller. The negative is those with savings suffer a devaluation. However they also gain an investment opportunity.

For sure oldens relying on cash suffer.

:beer:

gadgetmind

BLB53 wrote: »

I also like the Vanguard UK Equity Income Index but then you have to watch out for charges and custody fees.

I hold some of that alongside half a dozen other Vanguard trackers, and it's the one I watch most closely as I'm nervous regards all mechanical strategies for selecting dividend shares.

Dividends would be the way to go imo, whether or not you need them - if not needed immediately, they can always be reinvested.

I tend to agree, but I apply a higher yield tilt rather than going all-out for yield.

BLB53

I tend to agree, but I apply a higher yield tilt rather than going all-out for yield.

gadget, agreed, yield is not all or nothing and its good to focus on diversity and asset allocation.

Here's a link to an article on yield and ITs from TIM which some may find useful

http://www.thisismoney.co.uk/money/investing/article-2163616/Why-dividends-deliver-savers-welcome-support-battle-inflation.html