Mark Carney warns of complacency in financial markets

chucknorris

MFW_ASAP wrote: »

Well anyway. Knack or no. I started this thread a year ago and, despite the naysayers (who still don't have the grace to admit I was right and they were wrong), I made a 20% gain where others have remained static or lost money.

It's been a good experience over the last 12 months and that 20% will now have the next 20 years to compound, allowing me to retire early.

It's been emotional. :cool:

The next 12 month episode in my life will be to half all of my outgoings. I'll start a thread soon. Please keep following me and my amazing financial abilities

Well it paid off, so well done, you took a risk and it paid off. It is tempting to ride your luck, and I have also done it before in the past. My wife did the same thing for the last couple of years and she eventually started saying, 'this is easy, I'm going to make £11k tax free (up to her capital gains tax allowance) every year, plus also some from my ISA, and she really expected to make around £20-25k tax free every year. She was definitely getting carried away.

I told her numerous times, that she had been lucky (as I also had), and that it wasn't as easy as she thought. I'm just in equities for the long term dividend income now, they are very tax efficient and will form a significant part of my retirement income.

Thrugelmir

MFW_ASAP wrote: »

I didn't 'pick' the date, that was just how it transpired...
http://forums.moneysavingexpert.com/showpost.php?p=18985729&postcount=1


Well, your 4% seems generous compared with the BBC's 3%:

"On average, shares in the FTSE 100 yield about 3% a year"
http://www.bbc.co.uk/news/business-30589031

However, the main problem you have is that if you state that the FTSE is the index and it has gained 40% over the period that my pension has gained 87%, then I've beaten the index by more than 100%. You can't double count and say the FTSE has gone up 66% including dividends.

Even then, I've still beaten your index by 21%.

That does suggests I'm a star day trader.

I merely used the index as an illustration to put figures into context. As conversely the total cost of buying the investments could have been higher than your base starting point. :eek:

I used 4% as I assumed that you wouldn't have held shares in Companies such as Lloyds or RBS who weren't paying dividends. Nor the other dogs propping up the index.

A couple of other factors. The dividends themselves would have been reinvested and earnt more income. Some companies have increased their payouts. Possibly my 4% was on the low side.

MFW_ASAP

Thrugelmir wrote: »

The dividends themselves would have been reinvested and earnt more income. Some companies have increased their payouts. Possibly my 4% was on the low side.

Nope, it was on the high side. The BBC has it at 3%.

Generali

MFW_ASAP wrote: »

Well I measured it against the matrix you gave me a year ago:



I missed on your ~3% dividend, but made 20.69% instead. Incidently, I also made a lot on dividends because I was day/week trading some shares when they went ex-dividend. An unexpected but welcome addition to my gains.

Life is good.

Well done and I am glad you're making money as I'm not one of those who begrudges the success of others, quite the reverse in fact.

You are taking on a lot of risk to turn a profit. I hope that you are comparatively young if that's your investment approach.

The pension fund suitable vehicle I work on is invested 58% shares (of which about 10% is emerging markets IIRC although I can find out the exact proportion tomorrow if you're interested), 19% fixed income, 12% cash and the rest is in property and alternatives.

You seem to be mostly in shares of which a large amount is Asia/EM. You're making money, which of course is the best measure of how an investment is panning out, I suggest to you that you might want to think a little more about diversification and risk management.

wotsthat

Vaguely interesting post about equity risk premium here.

http://monevator.com/the-equity-risk-premium-and-you/

At 4% to 4.5% it's probably a little less than people expect? At this rate of return it shows the importance of maintaining a high savings ratio and maximising tax efficiency.

Some back of fag packet calculations for my sipp

Total Value = 100%
Net cash contributed = 45%
BR Tax relief & contracted out payments = 18%
Capital gain = 37%

..and c10% of the current pot came back to me as cash from HR tax rebates.

The capital gain has been great but it's the saving and 'free' money that's going to be funding my future lifestyle. Especially so as, like most people, I increased my savings rate as I got older so missing out on the full effects of long term compounding.

michaels

After fees I hope my pension fund will make 2% in real terms. Expecting any more is just fanciful. Returns above this are a zero sum game, for those who chase them there is a loser for every winner.

Generali

michaels wrote: »

After fees I hope my pension fund will make 2% in real terms. Expecting any more is just fanciful. Returns above this are a zero sum game, for those who chase them there is a loser for every winner.

I don't know if you remember/know about the blow-up of Amaranth as a result of losses in their 'Diversified Fund' which turned out to be 50-60% invested in gas futures...?

http://www.tradermike.net/2006/09/amaranth_advisors_hedge_fund_ruined_by_ignoring_risk_of_ruin/

Amaranth was a large hedgie at the time it all went wrong and is a great example of the risks from not diversifying.

AG47

He has a hard job, if he doesn't raise rates then we are still in an emergency 300 yr low record!

If he does house prices will have a large correction with record number of defaults.


Either way he can't try to claim recovery on his watch.

Generali

AG47 wrote: »

He has a hard job, if he doesn't raise rates then we are still in an emergency 300 yr low record!

If he does house prices will have a large correction with record number of defaults.

Either way he can't try to claim recovery on his watch.

Why do you think that please? Surely the MPC (not Mr Carney) will increase rates only when the economy can cope with higher rates. House prices only fall when there are forced sales, history tells us that.

IronWolf

Its a bit rich of Carney to say this, I mean I have to wonder what goes through the mind of these central bankers. Its their policies that have forced investors to seek yield, the banks and pension funds are forced to keep a certain amount in investment quality instruments, so they dont really have a choice but to pay over the odds for poor yielding investments. Junk bonds just follow the yield of the rest, it isn't really investor complacency its just the reality of how low interest rates impact investor decisions.