Interest rates so low - don't bother saving!

gadgetmind

Glen_Clark wrote: »

How could lessons from the past have predicted the printing of £375bn?

The past has told us that you need a diverse portfolio and a long-term view.

From time to time, governments do default (both hard and soft), equities do rise and fall in value, gold does wax and wane in desirability, and interest rates and inflation do fluctuate wildly.

You can try and guess what's going to happen next or you can construct a portfolio for all seasons (though perhaps with an eye to value?) and pull up a chair.

Sitting 100% in cash makes as little sense as being 100% in equities or filling your wall cavities with gold.

Linton

Glen_Clark wrote: »

How could lessons from the past have predicted the printing of £375bn?

That has surely affected savings returns far more than equity.

Glen_Clark

Linton wrote: »

That has surely affected savings returns far more than equity.

Its debateable which has been affected most.
The point I was trying to make is that the money printing has been on an unprecedented scale, and has turned the free market fundamentals upside down. I know of nothing like it in the past.
(The best likeness to QE I have heard is Mervyn King sitting in the driving seat with his foot flat to the floor on the accelerator. The engine is screaming, we are running out of petrol, but going nowhere because the gearbox is broke)

JohnRo

Glen_Clark wrote: »

Its debateable which has been affected most.
The point I was trying to make is that the money printing has been on an unprecedented scale, and has turned the free market fundamentals upside down. I know of nothing like it in the past.
(The best likeness to QE I have heard is Mervyn King sitting in the driving seat with his foot flat to the floor on the accelerator. The engine is screaming, we are running out of petrol, but going nowhere because the gearbox is broke)

With him hanging his head out the window screaming at the army of savers and pensioners behind, "push, push"

A couple of bankers he's carrying sit on the back seat smoking cigars and sipping champagne.

Linton

Glen_Clark wrote: »

Its debateable which has been affected most.
The point I was trying to make is that the money printing has been on an unprecedented scale, and has turned the free market fundamentals upside down. I know of nothing like it in the past.
(The best likeness to QE I have heard is Mervyn King sitting in the driving seat with his foot flat to the floor on the accelerator. The engine is screaming, we are running out of petrol, but going nowhere because the gearbox is broke)

I think you are a rather OTT in your interpretation of the situation and your wild comparison seems a bit non-technical. Perhaps you need to have a deeper look into real economics. But also look at what is happening to real equity investments. Consider for example my UK dividend paying share portfolio which has returned 15.6% in the past 12 months tax free. How are your savings? Which of us is laughing?

And if you dont like the UK economy there is the whole world to choose from.

grey_gym_sock

pqrdef wrote: »

You protect cash from inflaton by capitalising part of the interest. If you can't get a high enough interesr rate, or an index-linked product, or a foreign currency, you may have to put up with a negative real return. But there are limits to that if the Bank doesn't want a mass flight from sterling to foreign currency.

so the worse plausble outcome for holding cash is a small negative % per year. at least providing you manage to get out of currencies or countries which are complete basket cases.

fair enough.

that could still involve slowly losing a significant part of your wealth, over a few decades.

the worst plausible outcome for a broadly-based investment portfolio, over a few decades, is not worse than that, perhaps a bit better. the best plausible outcome is massively better than that. so what is there to lose?

Well there's an easy way to make a fortune. If you happen to know which investments will be average.

nobody's perfect, but you can take a good stab at being average by diversifying widely.

or is not what you meant?

You didn't mention that some of those taking the residual risk end up bust.

not particularly relevant when you're buying a broad range of companies, some of which may go bust, but all with limited liability.

would have been a good point if i'd be saying it was a good idea to become a name at lloyds.

Glen_Clark

Linton wrote: »

I think you are a rather OTT in your interpretation of the situation and your wild comparison seems a bit non-technical. Perhaps you need to have a deeper look into real economics. But also look at what is happening to real equity investments. Consider for example my UK dividend paying share portfolio which has returned 15.6% in the past 12 months tax free. How are your savings? Which of us is laughing?

And if you dont like the UK economy there is the whole world to choose from.

Money printing has lowered interest rates and increased share and asset prices. My shares have done well too (particularly since I own them directly with no middlemen taking a cut). But I am not laughing about it.

lvader

Glen_Clark wrote: »

Money printing has lowered interest rates and increased share and asset prices. My shares have done well too (particularly since I own them directly with no middlemen taking a cut). But I am not laughing about it.

QE doesn't lower intrest rates, it lowers gilt yields. The reason that it can help stocks is that money that would have gone into gilts has to go elsewhere and gilts become less attractive due to the lower yields.

Glen_Clark

lvader wrote: »

money that would have gone into gilts has to go elsewhere

Correct.
And because of all this extra cash in the system banks have less demand for savers funds which has led to lower interest rates.

atush

Unfortunately it's too late now for us to take advantage of the last 25 years.

No. Those who don't learn lessons from history are destined to make the same mistakes as those in the past.

For instance, any of you cash-only investors out there who are afriad of investment risk because you 'lost' money in the markets Forced yourself to lose. Because, if you looked at history (say the crash of 87) you saw that those who lose out, are the ones who sell in a panic.

Those who remain invested don't lose out in the end as the investments tend to rise after those who panic have sold. And those who remain paying in each month (ie dripfeeding into pensions etc) are buying investments at a discount. Eventually prices rise and these investors get the biggest boost (after those who buy during market crashes as I have done in the past).