Is a Financial Adviser worthwhile for investments (and when)?

dunstonh

Why would not worldwild equity tracker be suitable for most consumers ?

The average UK investor is considered to be cautious. 100% global equity is way above that level. So, for most people it would not be suitable.

You also have to consider capacity for loss as well as behaviour. How would a 50% loss of capital cause you to react and how would it affect your financial plans?

justme111

dunstonh wrote: »

The average UK investor is considered to be cautious. 100% global equity is way above that level. So, for most people it would not be suitable.

You also have to consider capacity for loss as well as behaviour. How would a 50% loss of capital cause you to react and how would it affect your financial plans?

Is there any other fund/shares product which would be guaranteed not to lose 50% ? If not than the issue is not with a world tracker but with suitability of money being invested altogether.

justme111

noggin1980 wrote: »

it is suitable for most people but alot of people wouldn't want all their money in equities this is especially true as you get closer to retirement, if you are in your 30's and the stock market drops 30% bummer but you can ride it out no problem and it might even be a good thing in the long run however if you are nearing retirement it might really mess up your plans, so you'd have half say half your money in equities and have in bonds so that 30% crash it's massively mitigated.

Also some people may wish to have their money in funds that produce bigger dividends for income rather than be hoping for their shares to go up in value again especially true in retirement.

Advisors can definitely be very useful I just don't think the costs are really justified in some situations and that it's ignorance in many cases that lets them get away with it, people don't realise the full effect high fees can have.

Dunstoh said that tracker would not be suitable for most of investors , not " that tracker would not be suitable to puy ALL your money in. That goes without saying. I was asking on clarification on original statement

Linton

justme111 wrote: »

Dunstoh said that tracker would not be suitable for most of investors , not " that tracker would not be suitable to puy ALL your money in. That goes without saying. I was asking on clarification on original statement

As soon as you permit a global tracker and something else you are deviating from the % allocations of a pure global tracker. With enough of the "something else" the global tracker becomes pointless.

bowlhead99

justme111 wrote: »

Is there any other fund/shares product which would be guaranteed not to lose 50% ? If not than the issue is not with a world tracker but with suitability of money being invested altogether.

Many funds products are designed not to be so volatile as a fund which puts most of its money in the highest valued companies across the planet (like a global tracker does).

Funds that focus on investing in bonds, commercial property etc are unlikely to experience drops in value by themselves of 50%, and as the valuation movements in such asset classes are often uncorrelated with the movements in shares, when all three asset classes are used together in a fund it is even less likely that everything would plummet by 50%.

Typically, a person would have a portfolio constructed of multiple funds which complement each other and provide balance to the portfolio although at lower levels of investing, one or two multi-asset funds could be used instead.

But long story short, no most people wouldn't have all their money invested in a global equities tracker, they would have their money invested in a wider set of assets.

And if you are talking just about the equities component, a lot of people would not want the ups and downs of all global companies skewed to market value - they may instead seek some sort of 'home bias' in terms of geographic exposure, or avoid certain volatile sectors, or focus on generating steady income - or any one of a whole range of measures based on their objectives, which doesn't result in them buying a global tracker,

justme111

Linton wrote: »

As soon as you permit a global tracker and something else you are deviating from the % allocations of a pure global tracker. With enough of the "something else" the global tracker becomes pointless.

I meant some wealth in saving accounts , some in property - either one's own or btl , some in bonds. So that global tracker accounts for 100% but of investment part of one's money only.
Was very useful to read your replies though (and bowlheads) , thank you very much , I understand it may be difficult to explain something that you know to someone who does not know it as you don't know what else that someone doesn't know , tx for explaining

justme111

Further questions - what return one might expect from funds that invest in bonds? If those are uk government bonds -is not return on them close to 0 ? If so - why not to keep money in plain savings accounts instead as there would be no return generated anyway ? If those are corporate bonds then they should not be any safer than equities?
Its hard to learn when one does not know what one does not know , thank you for your time.

Eco_Miser

Linton wrote: »

As soon as you permit a global tracker and something else you are deviating from the % allocations of a pure global tracker.

That would be the point of having something else, such as property, or bonds or cash.

Linton wrote: »

With enough of the "something else" the global tracker becomes pointless.

Yes, but there's certainly a point in having 25% or more global tracker.

bowlhead99

justme111 wrote: »

Further questions - what return one might expect from funds that invest in bonds?

Variable returns - just like every other asset class. Less volatility than equities.

If those are uk government bonds -is not return on them close to 0 ? If so - why not to keep money in plain savings accounts instead as there would be no return generated anyway ?

If you don't like the returns of UK government bonds, you could invest in other countries' government bonds, or corporate bonds. Or a mix of all sorts of bonds.

If those are corporate bonds then they should not be any safer than equities?

You should probably look into the difference between bonds and equities.

Essentially, companies have a legal obligation to pay the interest on their loans (bonds), and to ensure they are able to pay off their lenders (bondholders), before they return their assets to their owners (shareholders). So, it is safer to loan money to a company than it is to become its owner.

There are many instances of companies' shareholders getting entirely wiped out, or getting their ownership rights massively diluted, collapsing the value of their shares and future income from them, while bondholders take only a small or temporary hit, or no hit, or even get granted large slices of equity ownership as compensation for not being able to be paid out in cash.

So, while the values of some high yield corporate bonds might be correlated to the financial strength of the company and thereby its equity price, the returns (made up of a combination of interest yield and valuation) can be greater in some economic conditions than those of equities.

justme111

Thank you
Hopefully by the time I will have enough money to justify an IFA I will feel able to DIY