Interest rates so low - don't bother saving!

atush

Scary, yes PE is. But I hold Graphite and am a fan.

Unfortunately, I didn't top up then-just my normal monthly investment as I had other things I did buy (and was paying for university for my son with my 'spare' income). So well bought.

pqrdef

grey_gym_sock wrote: »

my point hasn't been about using asset managers vs DIY.

Neither was mine, that's why I said "lend" and "interest". I was suggesting that if buy-and-hold investing in diversified portfolios was profitable, businesses would be doing it, at their own risk, using borrowed money (cash deposits) for gearing. In real life, investment houses make money from trading, managing other people's money, gambling with other people's money - but not from actual investing.

grey_gym_sock wrote: »

i'm claiming that a decent investment portfolio has less chance of doing badly than an all-cash portfolio in the long term. (and a much better chance of doing very well.)

I know you are, but there's no basis for it. The investor has more chance of diong badly, not less. And the longer the term, the more likely he is to do badly, and the worse he can do.

The arithmetic is essentially the same for all gambling schemes. In the long run, almost all investors would get wiped out if they lived long enough. Diversification and a well-chosen portfolio can only slow down the process.

One game strategy is to hope to get lucky before getting unlucky, and then take the profits and run like hell and not come back. But few investors do. Like any punter on the gee-gees, having proved they can make a profit, they stick with it until they've gambled the profit away.

As in war, exit strategy is crucial, but few investors have one. They may have retirement plans, but a rational strategy needs to be based on market conditions, not the age of the investor. There's no telling where markets will be when you're 60.

grey_gym_sock wrote: »

there is good evidence that some asset classes perform better than others

You should tell the economists. They'll have to rewrite the textbooks to explain why this superior performance isn't already in the price.

grey_gym_sock

pqrdef wrote: »

I was suggesting that if buy-and-hold investing in diversified portfolios was profitable, businesses would be doing it, at their own risk, using borrowed money (cash deposits) for gearing.

oh, i see.

well, businesses generally have too short-term an outlook for that to make sense. venture capitalists are thought of as relatively long-term holders, but they're typically looking at 5 years, which is still far too short.

it also only works if you can borrow very cheaply, which rules out some.

ISTR that a few universities have taken on long-term borrowings at low rates in order to invest the money. they can take a sufficently long-term perspective.

I know you are, but there's no basis for it. The investor has more chance of diong badly, not less. And the longer the term, the more likely he is to do badly, and the worse he can do.

The arithmetic is essentially the same for all gambling schemes. In the long run, almost all investors would get wiped out if they lived long enough. Diversification and a well-chosen portfolio can only slow down the process.

One game strategy is to hope to get lucky before getting unlucky, and then take the profits and run like hell and not come back. But few investors do. Like any punter on the gee-gees, having proved they can make a profit, they stick with it until they've gambled the profit away.

As in war, exit strategy is crucial, but few investors have one. They may have retirement plans, but a rational strategy needs to be based on market conditions, not the age of the investor. There's no telling where markets will be when you're 60.

huh? investing is not a zero-sum game, because companies make profits.

You should tell the economists. They'll have to rewrite the textbooks to explain why this superior performance isn't already in the price.

perhaps they'll have to invent something like the capital asset pricing model.

gadgetmind

grey_gym_sock wrote: »

huh? investing is not a zero-sum game, because companies make profits.

Yes, and this is why owning equities and bonds is so very different to hoarding gold.

pqrdef

grey_gym_sock wrote: »

huh? investing is not a zero-sum game, because companies make profits.

Ah, the underlying upward trend again. But it had better apply to the companies you're in. It won't help you if the whole market goes up on average, or even if everything else in the world goes up. You're only in what you're in, so I hope you've picked winners.

Because of course the interest on cash also comes from profits, ultimately, so the stock market isn't the only way to participate in that. You pay for the expectation of profit with the interest that you forgo by not being in cash. Some companies will exceed expectation, but it'll be more than a few that don't.

Glen_Clark

pqrdef wrote: »

if buy-and-hold investing in diversified portfolios was profitable, businesses would be doing it, at their own risk, using borrowed money (cash deposits) for gearing.

Investment Trusts do that.
(not saying its always profitable)

gadgetmind

Shelby Cullom Davis did pretty much all of his investing with 50% gearing. It seemed to work out well for him!

http://en.wikipedia.org/wiki/Shelby_Cullom_Davis

This biography of him is worth a read.

http://www.amazon.co.uk/The-Davis-Dynasty-Successful-Investing/dp/047147441X

I bought my copy 2nd hand for a couple of quid.

grey_gym_sock

pqrdef wrote: »

Ah, the underlying upward trend again. But it had better apply to the companies you're in. It won't help you if the whole market goes up on average, or even if everything else in the world goes up. You're only in what you're in, so I hope you've picked winners.

there is definitely a good case for sticking to low-cost trackers. only some of my investments are in trackers at the moment. feel free to mock me for not sticking to them.

Because of course the interest on cash also comes from profits, ultimately, so the stock market isn't the only way to participate in that. You pay for the expectation of profit with the interest that you forgo by not being in cash. Some companies will exceed expectation, but it'll be more than a few that don't.

you participate by getting interest on cash. but on average you get a smaller slice of the pie. perhaps you need to read up on the CAPM.

gadgetmind

grey_gym_sock wrote: »

feel free to mock me for not sticking to them.

Mock me too then!

I'm majority passive but still have some active even in efficient markets. In five years time, I'm planning to flog everything that's in tax efficient wraps and decide where to go next. When I did this with some old pensions a year or so back, I went 90% passive. Next time it might reach the magic 100%.

atush

Gold and silver are commodity plays. They do not pay interest.

They could very well I(and have in the past) go down strongly. I would advise only having a small amt of any portfolio in PMs