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Interest rates so low - don't bother saving!
Comments
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gadgetmind wrote: »Why do you say that?
All of that is in the figures.
Where does that 10% come from and what have you bought and sold?
Trackers track the index (subject to tracking error) and we know what the index has done.
Of course, most investors will also have had holdings in bonds, US equities, pacific equities, EM equities and much more. My diversified and rebalanced holdings have enjoyed a pretty good decades.
If you deposit cash sensibly there are no extra charges to get your money in or out. If you invest in shares there are. If you hold the FTSE you have to sell the shares that drop out, and buy those that come in, which increases the charges. I am guessing the true charges of holding shares in a fund, because further investigation has shown total charges are always more than quoted. Quoted charges have come down recently. Not many people seem to realise the cumulative effect of charges. If you have £100, and lose 1% in charges, its £99 after one year, £98 after 2 years etc. (OK thats an over simplified illustration but you get the point) If charges were 0.8% per annum for example, that would be something like 10% off the total amount you would receive after 13 years.
I haven't worked the above figures out exactly, as its not relevant to the point I am trying to make. All I am saying is the index figures quoted are not achievable in practice because there would always be some charges - even for me who holds all my certificates direct, I still have to pay to buy and sell.. stamp duty... commissions.. spreads. Fund holders have all the direct and indirect fund fees on top of that.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Like what? Inflation affects everybody. It means your real return is less than your nominal return, whether you're in oil ptrospectors or building societies.grey_gym_sock wrote: »investments have different risks from savings. when you add 1 kind of risk (e.g investment risk), you may be taking away other kinds of risk. depending on timescale, aims, etc.
Investors bang on about savers losing out to inflation, but they never look at the effect of inflation on investment performance.
RPI-adjusted Footsie is down by a third from 1999."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
Sure - the only point I was trying to make is that matching the FTSE index is not achievable because there will always be charges, unlike cash deposited sensibly.The return from a FTSE tracker is the same as the return from the FTSE minus charges -
Thanks, Thats a good illustrationI can't find any of my tracker records going back to 1999 but from 2000, the Fidelity AS tracker has gone from 45p per unit to 68p now. That return includes dividends but not tax credits up to 2004.
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Glen_Clark wrote: »If you deposit cash sensibly there are no extra charges to get your money in or out. If you invest in shares there are. If you hold the FTSE you have to sell the shares that drop out, and buy those that come in, which increases the charges. I am guessing the true charges of holding shares in a fund, because further investigation has shown total charges are always more than quoted. Quoted charges have come down recently. Not many people seem to realise the cumulative effect of charges. If you have £100, and lose 1% in charges, its £99 after one year, £98 after 2 years etc. (OK thats an over simplified illustration but you get the point) If charges were 0.8% per annum for example, that would be something like 10% off the total amount you would receive after 13 years.
I haven't worked the above figures out exactly, as its not relevant to the point I am trying to make. All I am saying is the index figures quoted are not achievable in practice because there would always be some charges - even for me who holds all my certificates direct, I still have to pay to buy and sell.. stamp duty... commissions.. spreads. Fund holders have all the direct and indirect fund fees on top of that.
a) Of course there are charges for cash savings, its just that they are hidden in the interest given rather than being explicitly stated.
b) Quoted fund returns are after charges.
c) Surely what is important is the return after all charges have been paid. When I shop in Tesco I dont worry that the cost of my 17p lemon is taken up by 1p profit, 2p running the stores, 5p transport costs etc etc. All that matters is whether I am prepared to pay 17p for the lemon.0 -
a) Of course there are charges for cash savings, its just that they are hidden in the interest given rather than being explicitly stated.
b) Quoted fund returns are after charges.
c) Surely what is important is the return after all charges have been paid. When I shop in Tesco I dont worry that the cost of my 17p lemon is taken up by 1p profit, 2p running the stores, 5p transport costs etc etc. All that matters is whether I am prepared to pay 17p for the lemon.
Sure but the figures given for cash savings are after all charges. The figures given for a change in the FTSE index are before all charges.
The Tesco illustration is irrelevant because you have to pay all those costs. When holding shares you don't - you can hold the shares directly and avoid most of them.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Glen_Clark wrote: »Sure but the figures given for cash savings are after all charges. The figures given for a change in the FTSE index are before all charges.
The Tesco illustration is irrelevant because you have to pay all those costs. When holding shares you don't - you can hold the shares directly and avoid most of them.
PS: the figures I have seen quoted for cash savings were at best for average accounts. Not a rate tart like me who keeps switching to higher paying accounts.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Glen_Clark wrote: »If you hold the FTSE you have to sell the shares that drop out, and buy those that come in, which increases the charges. I am guessing the true charges of holding shares in a fund, because further investigation has shown total charges are always more than quoted.
All of that will show in tracking error and many trackers (such as Vanguard) have *very* low tracking error.
Don't get me wrong, I do hold cash, but this is as a buffer and for rebalancing against other assets. My cash does not contribute to my retirement plans in any other way and if you delete the cash line in my spreadsheet then my post-retirement monthly income doesn't change. This is because cash rarely beats inflation by a sufficient margin for it to be regarded as a source of income.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 -
Glen_Clark wrote: »Sure but the figures given for cash savings are after all charges. The figures given for a change in the FTSE index are before all charges.
The Tesco illustration is irrelevant because you have to pay all those costs. When holding shares you don't - you can hold the shares directly and avoid most of them.
Yes, if you have a large sum of money you could hold sufficient FTSE100 shares to match the index. Perhaps £250K would be a reasonable amount. People with say £10K get the risk minimising diversification and nearly match the index by buying a tracker.
And of course you can beat the FTSE100 by not buying the FTSE100.0 -
What makes you think there'll be a high underlying upward trend? Please don't quote historic figures, just tell m where you bought your crystal ball.Bigger risk basically means higher volatility. So there is quite a high short term risk that your investments will drop in value. But if there is a high underlying upward trend this will eventually dominate the volatility.
It's true that the quoted risk measures, beloved of IFAs, are really only measures of volatility. But volatility isn't the only risk factor. Sometimes an investment that isn't particularly volatile turns out to be a turkey. Then they say it was mis-sold as low-risk. I wonder what they'll say when gilts crash."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
Yes, if you have a large sum of money you could hold sufficient FTSE100 shares to match the index. Perhaps £250K would be a reasonable amount.
I guess it depends on how close you want to get. My preference is to try and roughly match the FTSE 350 HY index by buying shares across that range of companies that provide strong but (historically) reliable dividends.And of course you can beat the FTSE100 by not buying the FTSE100.
Well, quite. My largest single holding (ignoring tech shares!) is in a single global Vanguard tracker to which I've then added more mid-cap and EM via other trackers and a teeny sliver of active.
The FTSE is all well and good, but so are baked beans.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
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