MSE News: Best-buy savings accounts often beat investing in stock market, study...

kidmugsy

A mixture of gilts and cash would have done well since 1999, with much less volatility than equities. Gold and silver would have done pretty well too, and London property of course. It's almost as if there is a case for diversifying.

It's worth remembering that the private investor can get better rates on cash than the institutional investor can, which is one reason why cash will always look bad in figures produced by the institutional investor.

Similarly, unless the private investor is attentive to costs (and taxes) he's likely to find that his equities do distinctly worse than the indices about which institutional investors make such a fuss. There are a lot of people who want their spoons in your equities broth.

VT82

kidmugsy wrote: »

For example, over the 84 14-year periods from 1995, cash beat shares a whopping 96% of the time.

And all 84 of those 14 year periods just happened to include 2008. How convenient.

This research is a bag of cr a p.

zolablue25

VT82 wrote: »

And all 84 of those 14 year periods just happened to include 2008. How convenient.

This research is a bag of cr a p.

But 2008 did happen. He didn't make it up. You can't just take it out because it looks bad. If you were invested in the market before 2008 you would have experienced it. If you were in cash you wouldn't (well, of course you would have experienced 2008 but not the associated equity crash)

I'm not saying the research isn't flawed but it would have been equally, if not more, flawed to remove 2008. If you only inlcude the good years for share ownership then, yes, equities look great. Unfortunately there are also bad years.

gadgetmind

My fear is that by comparing the most intelligent thing you can do with cash (dodge from best account to best account with the agility of a mountain goat while somehow avoiding tax) with the least intelligent thing you can do with equities (all in one market and no other asset classes used to rebalance) it may cause a few to use cash when there are better options.

Pincher

What we really need is for the FCA to set up a set of "model" investments.

Define a set of strategies, and just open REAL bank accounts and trading accounts.

Save £10, £100 and £1,000 a month to reflect different sized pockets.

It doesn't cost that much money. In the worst case scenario, the FCA can just shut down the program and take the money back.

In fact, get some sponsors. So, say Lloyds, could put in £10 a month, and get a mention on the webpage that shows the account.

After twenty years, they can always give the money to charity if they can't just use it for running the successor to FCA. Let's face it, FSA didn't last 20 years, so I don't expect FCA to either. :rotfl:

talexuser

My take is wondering why the FTSE100 has done so relatively poorly if it is the largest (safest?) companies and often the dividend payers that end up again and again in top income funds that do better?

gadgetmind

Over other time periods, the FTSE 100 might have done very well, but it concentrates (by definition) on the mega caps and is very biased towards oil, diggers, banks, insurers, etc.

It's not a terrible index and I hold a slug myself, but I do this alongside other asset classes and other territories/caps.

Malthusian

gadgetmind wrote: »

My fear is that by comparing the most intelligent thing you can do with cash (dodge from best account to best account with the agility of a mountain goat while somehow avoiding tax) with the least intelligent thing you can do with equities (all in one market and no other asset classes used to rebalance) it may cause a few to use cash when there are better options.

I agree. But I am sanguine about that possibility because anyone who takes this research at face value probably shouldn't be investing - they will be the sort that pulls it all out as soon as the markets go down. It will probably tickle a few confirmation biases and that's all.

Rollinghome

gadgetmind wrote: »

My fear is that by comparing the most intelligent thing you can do with cash (dodge from best account to best account with the agility of a mountain goat while somehow avoiding tax) with the least intelligent thing you can do with equities (all in one market and no other asset classes used to rebalance) it may cause a few to use cash when there are better options.

I don't think the comparison was intended to use "the most intelligent thing you can do with cash". Instead, it just used the best paying one year fixed rate which, as we know, would currently pay just a fraction of what could easily be had from from high interest current accounts. Shouldn't demand much agility, just a glance at Moneyfacts once a year should do it.

It's a near impossible task to make a comparison that can't be challenged as being selective and very predictable that people tend to get very upset at having their prejudices challenged: particular those in the investment industry.

If anything is to be taken from it, it's probably that smart saving is likely to do better than dumb investing (especially if it involves high fees) and that the assumptions of the curiously revered Barclays Equity Gilt Study are a nonsense - which you probably already knew. Anything that encourages people to think a little rather than follow assumptions is likely to be a good thing.

VT82

zolablue25 wrote: »

But 2008 did happen. He didn't make it up. You can't just take it out because it looks bad.

I'm not saying the research isn't flawed but it would have been equally, if not more, flawed to remove 2008.

Sorry, in my effort to provide a more impactful, sound-bitey kind of response (not my usual style, but I was trying something new), I might have not made my point entirely clear. I was bemoaning the misleading use of statistics - they have manufactured the most damning statistics about shares investments they could from the available data. 2008 was the single worst year in the period analysed, and cutting the data into 14 year periods is the only way where every data set includes 2008 in full. Hence: '96% of the time, cash invested for 14 years did better than investing in shares over the same period' - a terribly contrived claim.

Even setting aside all the very valid arguments in favour of shares ('you could do better than the FTSE100 as a share investment', 'opening new bonds every year would be a pain', 'the adverse tax treatment of cash investments has been ignored', 'the savings landscape is a very different beast now' etc.), most people investing for the long term don't have a specific end date in mind (and even if they did, they should de-risk towards the end of it, again making the analysis inappropriate), so the only statistic that is really relevant is the difference in growth assessed over the longest available period. And 6% in shares vs 5% in cash is a pretty significant difference when compounded over 20 years.