Financial dilemma regarding large investment

dunstonh

I'd be wary of IFAs. Someone has to pay for their car and mortgage. Do you want it to be you? That's liable for me to be shot down in flames.

So you should be. Everything people buy or get service from has a cost that includes paying people. The OP is self employed. Are you going to say that people shouldnt use him for whatever he does? Or perhaps you should hand back all the money you have earned in your life.

would a gain of 10 percent a year be unrealistic?

yes. And loss potential of around 40% as well if things do not go so well.

lthough in my sipp over past 2 years, I see companies like AVIVA, BAE, MAN GROUP all up over 30-40 percent..

And what about other companies that havent made as much or made losses? An economic cycle is closer to 10 years. Why are you just looking at 2 years?

stringer_bell

dunstonh wrote: »

And what about other companies that havent made as much or made losses? An economic cycle is closer to 10 years. Why are you just looking at 2 years?

I have only invested in these companies for past 2 years in my sipp, I'm guessing I got in at a good time

jamesd

stringer_bell wrote: »

I have only invested in these companies for past 2 years in my sipp, I'm guessing I got in at a good time

We've been in a bull market since early 2009 so yes, you got in at a good time. Long term UK stock market return is about 5% plus inflation, say 8-9% at today's rate. that comes with drops along the way of 20% two or three times a decade and 40-50% once or twice decade, like a roller coaster in reverse. bad news if you need to sell during one of the dips.

I'm also in the P2P camp for a lot of your money, spread over at least two providers, neither being the older one(s) paying only 5-6%.

stringer_bell

jamesd wrote: »

We've been in a bull market since early 2009 so yes, you got in at a good time. Long term UK stock market return is about 5% plus inflation, say 8-9% at today's rate. that comes with drops along the way of 20% two or three times a decade and 40-50% once or twice decade, like a roller coaster in reverse. bad news if you need to sell during one of the dips.

I'm also in the P2P camp for a lot of your money, spread over at least two providers, neither being the older one(s) paying only 5-6%.

for some reason, p2p does not appeal to me. I don't know whether its the fact I dont understand it or the fact I'm secretly hoping to get more than 5-10 %, which obviously isnt realistic

bowlhead99

stringer_bell wrote: »

for some reason, p2p does not appeal to me. I don't know whether its the fact I dont understand it or the fact I'm secretly hoping to get more than 5-10 %, which obviously isnt realistic

It is the fact that it is offering a boring basic return with a cap on what you can get back (a borrower might default and pay you back less, but he's not going to volunteer to pay more). While you have seen investment funds that can double their money in a year and you would much prefer to have that.

The problem is that as you have identified (with the help of others on this board), the returns for as long as you have been investing - including several years before you started investing - have given unprecedented returns from lots of types of funds, while in the long term, they are unlikely to, without significant risk.

If you want a figure that 'obviously isn't realistic' then of course it will seem more attractive than a p2p return which is more realistic (albeit still having downside risk). Just like I want a lottery win which is much more attractive than the return from a piggy bank over the year even though if I were realistic I would expect to get less from the lottery than from the piggy bank.

Equities fund investing is better than the lottery or gambling because long term it should make rather than lose money but in the short term anything could happen, while the returns from diversified p2p are more likely to be fixed and reliable.

atush

stringer_bell wrote: »

I was actually thinking of sticking it in High yield bluechip shares.. BAE, Imperial, Vodafone, Glaxo etc and maybe a few punts like dixons carphone or man group.. the first £25k, maybe 10x2.5k.. see how that goes for a few months

Have you considered, instead of or alongside, investing in some good investment trusts that have a long history of maintaining and increasing dividends for years?

jamesd

stringer_bell wrote: »

for some reason, p2p does not appeal to me. I don't know whether its the fact I dont understand it or the fact I'm secretly hoping to get more than 5-10 %, which obviously isnt realistic

Probably both but you should learn about it. We're at the point in a bull market where it's desirable to start looking at diversification into things that protect capital from drops in share values. P2P is an excellent option to do that because with returns of 10% or more available it not only matches or beats the long term equity return level it's relatively stable and not directly linked to stock market performance.

The time to go really heavily into equities with a lump sum that is a substantial portion of your total assets is after the next big drop, not now. Something like P2P initially then investing the repayments, say.

TheTracker

Sad to see an IFA perpetuating the myth of market timing.

Generali

OP - if you're interested in High Yield shares try this lot:

http://boards.fool.co.uk/high-yield-hyp-practical-51676.aspx?mid=13162792

They start with the basic premise that they can't guess the future so use a simple screening mechanism to pick a portfolio. I've been following them for years and they are a very interesting bunch. It's free to join and use and I have no financial connection with the website.

jamesd

TheTracker wrote: »

Sad to see an IFA perpetuating the myth of market timing.

That's not something you've seen in this discussion, though thanks for complimenting me by thinking I'm an IFA.

My own observation was based on the current cyclically adjusted price/earnings ratio in many markets and the historic record of that being a good predictor of future returns. Since P2P is currently available and delivering greater than historic equity returns we're at a time when some P2P is looking more attractive than some world equity and bond markets.

While I'm familiar with the investment theory that the optimal thing to do is invest all of the money immediately, that investment theory does not say that I must put the money into the investment that has the lower prospective returns when I can instead put it into investments offering higher prospective returns. The risk-adjusted prospective return of some P2P beats that of some equities at present. Though not all. As Robert Shiller noted in this weekend's Financial Times, Greece, Russia, Hungary, Portugal and Italy have the lowest cyclically adjusted P/E ratios at the moment and he's doing some investing in Italy as a result of that observation. I don't expect that Nobel Laureate to ignore his research showing that stock market returns were inversely correlated with cyclically adjusted P/E and I'm not about to do so either.