What would you do?

noggin1980

TakeCareOfThePennies wrote: »

I'm merely trying to lead people in what will inevitably be the right direction of thinking ...

I'm not saying "my way is the right way".

:rotfl::rotfl:

KGriff

See YouTube video:
http://youtu.be/bOADOb-fFbw

David Buik sums up the volatility of the the stock market in 2015 and there are many other investors who share his view.

I know a few here on the forum will wait to see if he is right. He reckons in another of his video interviews (available via interactive investor) that the FTSE could be as low as 4000 by 2020, in which case that has implications for the infrequent trader, who has self-invested for the long term.

So there are many good reasons now, at this moment in time, given the political situation, the issues with Russia and the European economy, why I think cash isa's should not be simply ignored out of hand.

Keeping a good balance with a degree of caution may not seem like the best option right now, but it could lead to a better result in the long term.

Eco_Miser

[what are investments for, if not to fund future spending?]

TakeCareOfThePennies wrote: »

Income
Capital Growth
or a mixture of the two

However to access the Capital Growth, I would need to sell some investments, which you said I should not do.

TakeCareOfThePennies wrote: »

I also repeat my point that investments are not there as a substitute for cash. You should have sufficient cash to cover both emergency expenses and immediate expenses.

I actually do, but maybe not for the rest of my life.

TakeCareOfThePennies wrote: »

Thus. You have cash pot. You spend money out of cash pot. Income from investments tops up said cash pot. Rinse and repeat. That is the holy-grail of income investing.

The Holy Grail is not achievable by ordinary mortals.

TakeCareOfThePennies wrote: »

If you start selling investments to fund your expenses, then you're both eroding your capital and reducing your future income.

If you spend your cash pot, you're still eroding your capital, and if that doesn't reduce your future income it's because there's no present income either.

But many people deliberately plan to do just that, to bridge a gap between retiring and drawing a pension. I did it myself. The apparent reduction in future income does not matter, since future income is going to increase massively when the pensions kick in.

Other people plan to use 18 years of savings and investment growth to fund their offspring's education and/or housing needs.

That's two cases of knowing you will need to sell investments in the future in order to fund expenses, where keeping the money in cash would be just stupid, but you think

TakeCareOfThePennies wrote: »

If you think you might need to sell investments in the future in order to fund expenses then that money really should have been in a cash savings pot instead, because that's not what investments are there for.

In my opinion that's exactly what investments are for.

TakeCareOfThePennies_2

I have not (yet) viewed the video referred to by KGriff, but I agree with the sentiments expressed in the last two paragraphs of the post.

KGriff wrote: »

So there are many good reasons now, at this moment in time, given the political situation, the issues with Russia and the European economy, why I think cash isa's should not be simply ignored out of hand.

Keeping a good balance with a degree of caution may not seem like the best option right now, but it could lead to a better result in the long term.

I would not necessarily agree that early 2015 has been a volatile period overall in the markets, although in some sectors it has. However a broader correction is likely to be on the cards, perhaps sooner than many people here may think.

That's why rushing into investments and erring on the side of being slightly overweight cash might not be such a bad idea.

TakeCareOfThePennies_2

Eco_Miser wrote: »

However to access the Capital Growth, I would need to sell some investments, which you said I should not do.

No, I said, if you must, you must.

If you fall into the "younger" category, then capital growth should normally be your aim. And therefore un-necessary erosion of your capital should be avoided for that reason.

If you fall into the "older" category, then income is normally your aim. And whilst you might be old enough not to care about capital erosion because you're a coffin dodger with nobody to leave your money to, you should avoid selling anyway because you'll only be eroding your income.

There are also the broker fees and possible tax implications I alluded to when going the sell vs income route.

Eco_Miser wrote: »

The Holy Grail is not achievable by ordinary mortals.

So why do you bother investing at all if you've got no aspirations to either grow your capital or income ? You might not be able to achieve perfection, nobody can, but you can at least put yourself on the path to The Holy Grail.

I think we could go round in circles on this one Eco Miser !

Eco_Miser

TakeCareOfThePennies wrote: »

No, I said, if you must, you must.

Not originally. If you had, I wouldn't have asked the question.

TakeCareOfThePennies wrote: »

If you fall into the "older" category, then income is normally your aim. And whilst you might be old enough not to care about capital erosion because you're a coffin dodger with nobody to leave your money to, you should avoid selling anyway because you'll only be eroding your income.

My income from pensions should be sufficient for my normal spending, but I may want to enjoy some extra spending while I still can.

In other words, doing the opposite of what I've done so far, and give up future income for current spending.

TakeCareOfThePennies wrote: »

There are also the broker fees and possible tax implications I alluded to when going the sell vs income route.

I don't think a fiver or two is anything to worry about, and since nearly all my investments are wrapped in ISAs, I'd have difficulty exceeding my CGT allowance.

TakeCareOfThePennies wrote: »

So why do you bother investing at all if you've got no aspirations to either grow your capital or income ? You might not be able to achieve perfection, nobody can, but you can at least put yourself on the path to The Holy Grail.

Where did I say I've no aspirations to grow my capital or income? I just think that now I'm in the de-accumulation phase, I may be spending money faster than it comes in. Or I may not. In any case, investment is likely to be better than holding massive amounts of cash.

TakeCareOfThePennies wrote: »

I think we could go round in circles on this one Eco Miser !

It's hardly going round in circles when you ignore half my points.

brasso

TakeCareOfThePennies wrote: »

And I come back to my point that you should not be in that position in the first place. Unless you're facing an extraordinarily large and unexpected expense you should not need to sell your investments.

Agreed. I certainly never have been. But that doesn't mean I want to keep a year's salary in cash when most of it could be busy earning me money, as I've explained.

TakeCareOfThePennies wrote: »

You should have a sufficient cash buffer to cover both reasonable emergency expenses as well as living expenses for 6-12 months.

6-12 months' living expenses? Or salary? The former I can go along with, but not the latter.

Incidentally, it would make all the difference if you occasionally said "in my opinion" or "for someone with a very low risk tolerance like me, having 6-12 months living expenses in cash offers peace of mind."

I don't want to be instructed by someone who has such little interest in other people's personal circumstances, income needs, age, risk profile etc. We are not all like you.

TakeCareOfThePennies wrote: »

If you start selling to fund expenses, then not only are you eroding your capital, but you'll be hit for CGT taxes and broker commision, and you may be forced to sell at a loss, thus further eroding your capital.

If, if if. You may, you may, you may. Yes, anything is possible. But while you're stressing about the chances of needing plenty of cash shortly after investing it all, and at the very moment that the markets are hit by a major crash, you could have been relaxing at the thought of many years of that money earning you a very nice premium in dividend accumulation and capital growth -- such that you can quite easily absorb the very occasional stock market trauma.

TakeCareOfThePennies wrote: »

Yes cash is boring, yes you don't get much in the way of growth these days. But its a necessity.

No one has argued that one should have no cash resources. The disagreement is over how much.

jimjames

brasso wrote: »

No one has argued that one should have no cash resources. The disagreement is over how much.

There are so many variables that it's almost impossible to give a definitive answer that suits everyone. Safe to say having some cash buffer is worthwhile for almost everyone.

I'm happy to run with lower levels of cash than others might. I have sold investments in the past and surprise surprise haven't had to pay cgt or massive brokers fees. It really does sound like someone who has never invested and doesn't understand or know the current fee setup.

TakeCareOfThePennies_2

jimjames wrote: »

It really does sound like someone who has never invested and doesn't understand or know the current fee setup.

Could not be further from the truth.

That's all I've got to say on that matter. No interest in getting involved in jimjames' mud-slinging matches.

jimjames

TakeCareOfThePennies wrote: »

Could not be further from the truth, does this look like a portfolio of someone who has never invested ?

That's all I've got to say on that matter. No interest in getting involved in jimjames' mud-slinging matches.

Fair enough. So why make unsubstantiated claims about fees and cgt that aren't true if you know that?