£10,000 a year from 10 shares?

coyrls

jimjames wrote: »

Maybe read a few forum posts or Daily mail comments where people are moaning they get so little return on their savings pot without looking at what the alternatives are.

OK but in my opinion investing in 10 shares would not be a good alternative. As I've said previously there are better investment choices.

Aged

coyrls wrote: »

OK but in my opinion investing in 10 shares would not be a good alternative. As I've said previously there are better investment choices.

Did you actually read the article?!

simarks

bowlhead99 wrote: »

half the people in the country have below average intelligence

That's not a very intelligent comment.

jimjames

simarks wrote: »

That's not a very intelligent comment.

Not sure if you're being funny or just don't understand statistics.

gadgetmind

jimjames wrote: »

Not sure if you're being funny or just don't understand statistics.

Well, if by "average" you meant median then you're right, but people more often interpret "average" as being the mean, in which case you weren't right.

gadgetmind

Aged wrote: »

Did you actually read the article?!

Well, I did and I think their investment choices lacked diversity, so there are much better investment choices.

Why not try playing the ball rather than the man?

coyrls

Aged wrote: »

Did you actually read the article?!

Yes I did.

Raymondo111

bowlhead99 wrote: »

I agree with gadgetmind that someone who hasn't engaged in any retirement planning, should have.

But yes I do see your point. People who have diligently accumulated a large pot of investments over their working lives should have enough to see them through. The problem is that many, i.e. millions, of people don't understand finance. Even without a knowledge barrier, half the people in the country have below average intelligence. So, not everyone is going to have made knowledgeable, smart decisions.

Some of those people may well have diligently accumulated a large pot which should see them through if invested wisely. Let it keep growing, drawing down the minimum of what you need, or perhaps buy a guaranteed annuity so that they keep getting cash year after year, or perhaps a combination, and they would be fine, The risk is that plenty of people (who are not the relative experts who spend their time on MSE) will think 'I don't trust banks and finance companies, I would rather manage it myself, and by 'manage' they mean stick it under the mattress or in a bank account or in a bond paying fixed interest with no inflation link.

These people will take a reasonable sum of money that could last for retirement and destroy it because they heard that their parents or grandparents retired and 'lived off their savings': you put the money in a bank and the bank pays you money for keeping it there, right?

The difference is how long people are likely to live (longer), how much defined benefit pension they have coming in (generally lower), how much interest rate premium over inflation they can find at banks (zero or negative in the long long term, as opposed to some short favourable timespans that have occurred in the past that might colour their expectations).

It's clear that people should 'research and consider' and if some don't, that's their problem (as per Gadgetmind). But there can be absolutely no doubt that some people will not have researched and considered wisely, and are therefore in for a shock (as per Aged).

Sure, it is their fault that they are shocked. But they are still shocked. Unlike Gadget, they do not all have the experience and financial / commercial sense that comes from working at senior management level in a range of companies, and they don't have the same size pot that comes from maxing ISA and pension contributions every year. It may be a cliche to talk about 'the vast majority' and 'ordinary hard working people' but the ordinary people on ordinary average salaries with ordinary average levels of intelligence and knowledge of finance, are typically less equipped for retirement than the smartest of posters on an investments forum.

No denying that they should go and get themselves equipped but certainly no denying that they exist.

I would consider myself as reasonably savvy when it comes to investing our savings, my wife just leaves it to me and tells me to explain why I have moved/invested in the various Financial Institutions/Shares/ISA's etc.

Bowlhead, I think your response sums up exactly how many people view the subject of Pensions/Investments and how to manage their money.

I have the luxury of a final salary pension that I consider to be reasonable, I also get my State Pension and my wife gets 2 smallish pensions which overall allows us to live fairly comfortably. We have nice holidays every year which we enjoy but as we are getting older there may come a time when we won't be able to have our 'nice' holidays but for the time being we will enjoy life while we can.

There are a lot of people less fortunate than us and through no fault of their own would never understand a lot of the information on this savings and investment thread as sometimes its all a bit over their heads.

Thrugelmir

jimjames wrote: »

I assume aged is referring to the majority of people who think risk of shares is too high and just plonk their money in a cash isa or savings account.

Plonking money into 10 shares is sheer madness in the way the article describes. My SIPP for example currently has 63 investments. As I accept the fact that one day, one of the Companies is going to fail. That's Corporate life.

bowlhead99

coyrls wrote: »

OK but in my opinion investing in 10 shares would not be a good alternative. As I've said previously there are better investment choices.

Does the article suggest that these are the best investment choices that one can possibly find, or that a suitably educated and experienced investor could not do better?

gadgetmind wrote: »

Well, I did and I think their investment choices lacked diversity, so there are much better investment choices.

I doubt the purpose of the article was to try to give the absolute best possible investment choices, so whether a portfolio of those specific 10 shares in those proportions is suitable for every income seeker should not be an issue. It was a rough and ready piece to conceptualise the idea of how shares could deliver an income. As I mentioned, they also did another one containing 10 investment trusts. Was that one flawed because it didn't talk about investing into individual shares and p2p lending?

For the people, who we all know exist, who think that cash under the mattress is the way to plan retirement, and that 'playing the stock market' is just some gambling thing that lets you 'win' when share prices go up, it was perhaps an eye opener, to see that simply holding a set of shares in companies that we have all heard of can deliver an annual income well in excess of current inflation and what is achievable from savings accounts, albeit with risk of course.

Certainly if you didn't know anything about investing for income, the value to you of the free article might be more than you paid for it. Of course, they could have given you all the ins and outs of how much you can practically put into an ISA each year and more information on risk and market dynamics and some science behind the chosen level of diversification, but perhaps they were trying to knock out a 1-page article rather than a 200 page how-to book. Frankly I can't believe people are still banging on about it.

gadgetmind wrote: »

Well, if by "average" you meant median then you're right, but people more often interpret "average" as being the mean, in which case you weren't right.

When I referred to half the people being below average intelligence I was referring to the mainstream measure of intelligence, being IQ tests, where the median person in the group has IQ 100. It is not an exact science but the premise of using statistics to build the models is that there are as many people below that level as above it.

The IQ scores of 85 and 115 are around one standard deviation above and below the median, and of course, the interpretations of the results of those tests usually assign people into bands or zones, where about IQ 90 to about 110 would be called 'average'. So on that measure, less than half the people are below 'average'.

I don't know that any of us need to get too excited about whether literally half the people have below 'average' intelligence. On a mean basis maybe it is fewer. It is still many millions, so the point is still made. You can do all sorts of things with statistics: I have more than the mean number of fingers for a human being, but I have the mode and the median so I think I'm probably going to be OK. The point was not to quote a specific number of people who were ill prepared for retirement but simply to note that it will be a large number. Who cares if it is a half or a third or a tenth or a fiftieth of the population? Any of those figures is millions.