Interest rates so low - don't bother saving!

pqrdef

grey_gym_sock wrote: »

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

A few decades? Well they say the Church never dies, but for most people the best plan for a few decades is to assume that the next few decades won't go according to plan.

But things would have to be fairly dire for negative real returns to persist over a few decades.

grey_gym_sock wrote: »

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 I'll lend my money to some asset manager, who can pay me interest and keep the profits. Everybody wins.

But that deal doesn't seem to be on offer. Mainly because if we look at actual samples of "broadly-based investment portfolios" we see a wide spread in performance.

The win-win portfolio you're inventing here is a fiction. A portfolio that's capable of doing very well is also capable of doing very badly. One that can't do badly can't do well either.

Investors can be strangely schizophrenic. They don't seem to know whether they're trying to take risk or insure against it. So they bet against themselves all the time.

grey_gym_sock wrote: »

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

You were saying that those who take the risk will aim for a higher reward. I'm saying they don't get the reward they aim for, when you take an overall average including the ones that fail.

There are always winners and losers. If you expect to win, who do you think will lose?

pqrdef

gadgetmind wrote: »

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're arguing for a totally defensive stance. Nothing is safe, not even cash, so hedge, hedge, hedge.

OK. This is a lot like arbing. You optimise it by staking in inverse ratio to the odds. That would mean, keep most of the money in cash or near-cash and hedge with smaller stakes in more volatile investments like gold.

gadgetmind wrote: »

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.

You could buy capital protection funds and absolute return funds and leave the work to the professionals. Not the most sparkling performers though. And sometimes they get it wrong.

Or you can try your luck at out-guessing the professionals.

atush

innovate wrote: »

I am not disagreeing with you on the principle you are trying to get over, quite the contrary.

However, a blanket statement like this makes no allowance for people making bad investment decisions. There is a very real risk that people will lose out in the end (which they could reach very soon) if they pick the wrong investment vehicles/strategy.

Look no further than the "What to do with £1m" thread for people who'd blindly invest their entire capital into property, without demonstrating much of an appreciation of the subject. For those sorts of folks, it would rarely be a case of "sitting it out", unless they are stupidly lucky.

I completely agree- (and participated in that thread over the 100% in one asset class as here).

My main reason for not expanding (or pontificating) is that I did not want to go over the heads of those I wish to inform/educate/give my opinion. If you make the argument too difficult, many cash only investors will switch off.

If you are not financially aware/savvy then you need advice from an independent professional. Which many shy away from as they confuse Financial Advisers from their bank, solicitors, insurance companies with INDEPENDENT financial advisers. Any adviser wants (and needs as do you) to earn a living so they must earn something.

But independent ones cannot rely on an endless supply of sheep to the slaughter of their advice which is biased on what makes them and their bank the most rather than looking after their client.

IFAs want and need repeat investors, which in general you don't get if you screw them over with bad advice the first time. They have an inbuilt need to keep their clients happy (esp after RDR).

atush

Thrugelmir wrote: »

Not good for those retiring , or requiring the money during the interim period.

Every portfolio will have winners and losers. So the broader the remit of the portfolio. The more chance that the there'll be an overall gain.

Those requiring money immediatlely didn't listen to our MSE advice. to have a cash emergency fund.

Those retiring no longer have a need to go to all cash, as they don't have to buy an annuity. So are not limited in this way.

atush

gadgetmind wrote: »

And those who rebalance do even better. During 2011, I was reducing my cash and bond exposure and buying some ridiculously cheap equities.

I've recently added to cash simply because I was below target allocation, many equities were starting to look toppy, and I got a chance to stick a few bob away for a year at 3.6%.

I've often wondered if those who panic sell equities do the same if the value of their house drops? Do they perhaps tell the agent to immediately put their new house back on the market and sell immediately if they get an offer 25% below what they've just paid?

Probably not lol.

But re-balancing as an idea is very foreign to the target market of our audience here as re: my earlier post. Who think putting 100% of their assets onto one class is a good idea.

pqrdef

atush wrote: »

Those who remain invested don't lose out in the end

Those who don't sell at the bottom have lost just as much money as those who do. But those who sell figure to get their money back from new investments, whereas those who don't sell seem to think the best investments to get their money back are the same ones that lost it.

Maybe so, maybe not. Some companies recover, some don't. Sometimes you can even guess which. But the silliest reason to hang on is the idea that you haven't lost if you don't sell.

Of course it's better to sell before the fall. And the silliest reason for not trying is the idea that it'll all come out right if you just sit tight and hang on long enough.

gadgetmind

pqrdef wrote: »

Of course it's better to sell before the fall.

At last, someone who gets it, someone who has a crystal ball!

Please let us all know the next top and the next bottom.

Thanks,

lvader

pqrdef wrote: »

Those who don't sell at the bottom have lost just as much money as those who do.

If you buy 20 Apple shares and the markets tank bringing Apple share prices down you still have 20 Apple shares, you haven't lost anything.

atush

lvader wrote: »

If you buy 20 Apple shares and the markets tank bringing Apple share prices down you still have 20 Apple shares, you haven't lost anything.

exactly. And when the apple shares go higher, those who hold dont' lose out.

But yes, individual shares can actually go bust completely and never recover. Which is why, if you are risk averse, you dont' buy them but hold funds instead. And if you bought more apple shares during the fall, you are quids in.

missile

kazd wrote: »

I really don't understand .....

how anyone can believe what they read in the daily mail. :j