Santander dropping interest to 2%

bigadaj

chucknorris wrote: »

My horizon is still about 15 years away, we have about £1.1m in equities now, and when I sell some property I will be investing more. Although I accept that equities aren't for the faint hearted (that's why I deleted my post, I realised that I was probably to get dragged into discussions with bears that are wary of the stock market), but I can weather the volatility.

It's not great oractice to delete posts, probably better to edit them.

I'm not a bear and have far more invested in equities than in property, cash or any other asset class.

My point is that we are still in the asset price bubble that many think was popped at the end of the last decade. Near zero interest rates and printing huge amounts of funny money have kept asset prices high, of which shares are a major portion.

My reference to cape, cyclically adjusted price earnings ratio, was that by many measures major markets are over valued in the basis of comoany returns on investments.

The stock market is supposedly the raisin d'etre of free market capitalism but it, or rather they, are being kept aloft by government and central market intervention all round the world.

You seem to have taken my comments as those of someone who is wary of risk and investments, that's not the case, just that many economists believe that markets are heading for a fall.

Interestingly Jamesd who has made some very interesting posts on this site has stated he's moved largely out of equities for the reasons above. I don't have that level of commitment but a, trying to diversify, and putting money into p2p and to an extent property as the only safe mechanism of wealth preservation is diversification.

bigadaj

moneyfoolish wrote: »

If these high interest current accounts disappear it will give people like me a big problem. I have every penny of my savings in high interest current accounts, cash ISAs, NS&I Index Linked Bonds and NS&I Pensioner Bonds and at the age of 71 I don't really want to be putting money in the stockmarket which leaves me very little chance of earning anything worthwhile!

It depends on the sums involved really. If you are talking more than the one tens of thousands then non cash investments are probably advisable for a percentage of your money.

Linkers are looking more favourable since the Brexit vote, but investing in equities would give you some return, 3-5% is achievable with capital at risk, with expectation that capital might increase over the longer term rather than reduce. Similarly p2p is an option for a percentage, again capital is at risk but spreading between platforms and loans reduces the impact of any potential default, and 10-14% is possible secured on property or assets; so any default is unlikely to mean loss of 100% of capital just a percentage and a delay whilst assets are liquidated.

chucknorris

bigadaj wrote: »

It's not great oractice to delete posts, probably better to edit them.

I'm not a bear and have far more invested in equities than in property, cash or any other asset class.

My point is that we are still in the asset price bubble that many think was popped at the end of the last decade. Near zero interest rates and printing huge amounts of funny money have kept asset prices high, of which shares are a major portion.

My reference to cape, cyclically adjusted price earnings ratio, was that by many measures major markets are over valued in the basis of comoany returns on investments.

The stock market is supposedly the raisin d'etre of free market capitalism but it, or rather they, are being kept aloft by government and central market intervention all round the world.

You seem to have taken my comments as those of someone who is wary of risk and investments, that's not the case, just that many economists believe that markets are heading for a fall.

Interestingly Jamesd who has made some very interesting posts on this site has stated he's moved largely out of equities for the reasons above. I don't have that level of commitment but a, trying to diversify, and putting money into p2p and to an extent property as the only safe mechanism of wealth preservation is diversification.

Because my horizon is about 15 years away (it could be stretched to 20 years, I don't overly concern myself if the market could fall, of course it could, but it is also likely to recover. Nothing is 100% safe, so I tend to look at income rather than capital values (but within reason, as I don't want to take on exceptional risk, that is of course very subjective). I agree about diversity (and I am moving towards it, and have been for about 8 years), we have a portfolio of over £5m, but we only have about £1.1m in shares, so it isn't as if I am overloaded in equities, if anything I would like to increase that up to about £2.5m. The reason that I have not done that yet, is that I am waiting for when I perceive is the right time (for me) to sell property, as I have very low tracker mortgages (1%) that time is not quite now, but it is getting close.

EDIT: I must confess that I have been curious about P2P, but I haven't got a feel of the risk I that would be taking on, so I have avoided investing. When I do sell some property, I think that I may take another look at P2P, but I would mainly be investing the equity in corporate bonds (individual, not funds, because I would prefer to take on the risk of a 'safer' company going under, to bonds falling generally) and equities.

bigadaj

chucknorris wrote: »

Because my horizon is about 15 years away (it could be stretched to 20 years, I don't overly concern myself if the market could fall, of course it could, but it is also likely to recover. Nothing is 100% safe, so I tend to look at income rather than capital values (but within reason, as I don't want to take on exceptional risk, that is of course very subjective). I agree about diversity (and I am moving towards it, and have been for about 8 years), we have a portfolio of over £5m, but we only have about £1.1m in shares, so it isn't as if I am overloaded in equities, if anything I would like to increase that up to about £2.5m. The reason that I have not done that yet, is that I am waiting for when I perceive is the right time (for me) to sell property, as I have very low tracker mortgages (1%) that time is not quite now, but it is getting close.

Fair enough everyone's situation is different.

My original point was that your first post wouldn't have been representative for many, and this thread is primarily about a slight reduction in interest rates on an account that will hold less than £20k.

The post you deleted stated that equities were excellent value and many would argue this is not the case when compared with historic measures. The fact that they may form a valuable part of a portfolio primarily based on yield and tax allowances or relief for additional rate taxpayers again isn't representative for many, particularly for those affected by a reduction in income from a fully funded 123 account that would cost them around £200 a year.

chucknorris

bigadaj wrote: »

Fair enough everyone's situation is different.

My original point was that your first post wouldn't have been representative for many, and this thread is primarily about a slight reduction in interest rates on an account that will hold less than £20k.

The post you deleted stated that equities were excellent value and many would argue this is not the case when compared with historic measures. The fact that they may form a valuable part of a portfolio primarily based on yield and tax allowances or relief for additional rate taxpayers again isn't representative for many, particularly for those affected by a reduction in income from a fully funded 123 account that would cost them around £200 a year.

But I think it is even better value than a Santander 123 account, because of the £5k tax free allowance on dividend income. The ftse 100 dividend income for a basic rate tax payer is currently yielding a gross equivalent of almost 5%. Even small portfolios can be diversified (although fees of course have a larger impact).

As I said before, the investor's horizon is important, so if you can invest for 20 or more years, the concern about equities falling should not be paramount, as they are likely to recover as long as you can invest for the long term. I don't try and time the market, as long as I can stay in the market for the long term, I prefer to concentrate on income (not capital value protection), this will of course change as I get older.

xylophone

The stock market is supposedly the raisin d'etre

Low hanging fruit?:)

darkidoe

bigadaj wrote: »

Fair enough everyone's situation is different.

My original point was that your first post wouldn't have been representative for many, and this thread is primarily about a slight reduction in interest rates on an account that will hold less than £20k.

The post you deleted stated that equities were excellent value and many would argue this is not the case when compared with historic measures. The fact that they may form a valuable part of a portfolio primarily based on yield and tax allowances or relief for additional rate taxpayers again isn't representative for many, particularly for those affected by a reduction in income from a fully funded 123 account that would cost them around £200 a year.

Bonds, Equities, Cash, Property. None of them are of excellent value nowadays.. Maybe property when interest rates are so low. I haven't been investing for long, so maybe it has always felt like this.

bigadaj

chucknorris wrote: »

But I think it is even better value than a Santander 123 account, because of the £5k tax free allowance on dividend income. The ftse 100 dividend income for a basic rate tax payer is currently yielding a gross equivalent of almost 5%. Even small portfolios can be diversified (although fees of course have a larger impact).

As I said before, the investor's horizon is important, so if you can invest for 20 or more years, the concern about equities falling should not be paramount, as they are likely to recover as long as you can invest for the long term. I don't try and time the market, as long as I can stay in the market for the long term, I prefer to concentrate on income (not capital value protection), this will of course change as I get older.

Again you are looking at your own personal situation rather than waht a typical person might experience.

You can't talk about equivalent for dividend income, there was a notional tax credit until,this tax year but it never was a real thing and the yield is what you get, so around 3.5%. Dividend cover has suffered for many firms and there's a serious risk of cuts in the largest payers.

It's a big jump in risk profile to go from an fscs protected bank account to a stockmarket investment, you may have used the ftse 100 as a generic example hut it has been a terrible performer now for many years.

In terms of income and capital protection my priority is always total return.

bigadaj

darkidoe wrote: »

Bonds, Equities, Cash, Property. None of them are of excellent value nowadays.. Maybe property when interest rates are so low. I haven't been investing for long, so maybe it has always felt like this.

No, it's a post gfc world effect that's lasting for getting on for a decade now.

I think property is definitely over valued, p2p offers high return with risk, but the only real protection is to have a diversified portfolio both with equities and across the wider asset classes.

fun4everyone

bigadaj wrote: »

Interestingly Jamesd who has made some very interesting posts on this site has stated he's moved largely out of equities for the reasons above.

Do you have a link to this post (or posts). I would be interested to read them.