best long-term investments

FatherAbraham

lvader wrote: »

Where do people put money as an alternative when bonds and gilts beyond grossly over valued?

Into bonds and gilts, because one cannot know that they are grossly over-valued.

If, as some assert, it is "bleedin; obvious" that gilts are overvalued, the skeptical observer must ask "then why are those to whom it is a certainty that gilts are overvalued not short vast amounts of them?"

Should be easy money, shouldn't it? After you... ;-)

Warmest regards,
FA

jamesd

FatherAbraham wrote: »

You can't know that. Not with enough certainty to make sure money out of it.

There's little sure money in investing. It is impossible to know with certainty.

It is possible to observe that for it not to be true would require a change of past market and economic outcomes. Such changes are not impossible but not the sensible assumption to make. Even more so when the consequence of not following that assumption is to be buying in a market high before a downturn that could cause a substantial capital loss. In such circumstances prudence suggests a degree of weight reduction towards the areas that based on history are over-valued.

What the author whose content kidmugsy summarised observed was that based on historic precedents certain markets appeared to be over-valued. If you haven't read it all I recommend that you do, you may find it interesting.

Markets that are regularly hitting record highs are unlikely to be good buys.

If you want to follow someone, do feel free to follow me. I've been acting on these things for a while. Not with shorting but with reduced weights.

As you'll probably be aware a certain famous US figure had an investment business that lost a lot of money shorting European government bonds in the last few years. Markets can remain irrational for a long time, as that gentleman found out to his cost. Shorts can be very painful because the potential loss and actual margin requirement due to upwards volatility is unlimited.

jamesd

FatherAbraham wrote: »

Getting the biggest possible pot over infinite time is not the goal of personal-finance investment. It's not a sensible goal for anyone's retirement fund.

Taking the risk of having only one half of what one needs to live on, in order to have a chance of getting twice as much as one needs to live on is a bad gamble.

Those things tend not to be the goals. What tend to be the goals are achieving a reasonable retirement at a reasonable cost. To do so requires both some efficiency of investing and some efficiency of income taking or a willingness to commit comparatively large sums of money to handle low probability events.

The low probability events can be better handled by being flexible about retirement age and income levels, with downside potential targeted at staying well above the minimum required income level. What happens then is that in the more normal circumstances the individual gets the flexibility to retire earlier or draw higher income than they would have been able to do had they chosen the lower volatility options.

However, it's a fact of life that different people respond to uncertainty in different ways and some will choose the higher cost but more certain approach, with each individual somewhere along the spectrum.

FatherAbraham

jamesd wrote: »

What the author whose content kidmugsy summarised ...

KidMugsy didn't summarize the article. KidMugsy selected one aspect of the article, and then claimed that narrow aspect was a summary. Evil.

jamesd wrote: »

... observed was that based on historic precedents certain markets appeared to be over-valued. If you haven't read it all I recommend that you do, you may find it interesting.

Indeed.

Warmest regards,
FA

bowlhead99

jamesd wrote: »

FatherAbraham wrote: »

Getting the biggest possible pot over infinite time is not the goal of personal-finance investment. It's not a sensible goal for anyone's retirement fund.

Taking the risk of having only one half of what one needs to live on, in order to have a chance of getting twice as much as one needs to live on is a bad gamble.

Those things tend not to be the goals. What tend to be the goals are achieving a reasonable retirement at a reasonable cost. To do so requires both some efficiency of investing and some efficiency of income taking or a willingness to commit comparatively large sums of money to handle low probability events.

it's a fact of life that different people respond to uncertainty in different ways and some will choose the higher cost but more certain approach, with each individual somewhere along the spectrum.

Dammit you guys. As a typical anonymous poster on the internet, I live for argument and debate and would love to join the winning side. Not to listen to two people with logical views based on common sense and an understanding of psychology and markets which are interesting to listen to without being diametrically opposed!
:rotfl:

jamesd

Hey! We are supposed to diametrically opposed since we disagree about a lot on the risk side of things! You can't go around accusing us of not being so and expect to get away with it!

FatherAbraham wrote: »

KidMugsy didn't summarize the article. KidMugsy selected one aspect of the article, and then claimed that narrow aspect was a summary. Evil.

You know from my first post that I thought a more extensive version was useful. I can't knock it too much because it did get me to read something interesting.

Thrugelmir

jamesd wrote: »

To do so requires both some efficiency of investing and some efficiency of income taking or a willingness to commit comparatively large sums of money to handle low probability events.

Despite using rocket scientists to create the ultimate trading programmes even hedge funds came unstuck. On every roulette wheel there's a zero. That no amount of risk or probability analysis can allow for. As uncertainty is the unknown factor. The wheel is constantly spinning.

jamesd

Yes, those low probability events happen sometimes. Some way to deal with them is needed. Dsagreements involve the trade-offs in the various ways of providing for them.

My preferred way is to educate people about volatility and get them to think about the ranges of incomes that could work for them, so they can handle the uncertainties and have high probability of meeting their minimum needs if the worst of things happens but substantially better outcomes in the non-extreme cases. I do that because I know that the cost of not accepting the volatility is likely to end up producing the lower income far more often.