Why is 'Timing' the market bad ?

bowlhead99

EdGasket wrote: »

Neither do I.
I would get charged 0.25% platform fee which together with Newton's fees would mean making over 1% just to tread water; not really an attractive proposition.

Well, the suggestion is you hold this particular asset on a platform that charges you £12.50 or £0 which is more palatable than 0.25%.

Unless I'm missing something

BrockStoker

OldMusicGuy wrote: »

Nice post, thanks. I still regard myself as a newbie investor although I've been getting more active in the last couple of years as I approach retirement (I had an initial FA review but then decided to manage my own investments). Like many newbies I was getting attracted to the passive, index funds approach and of course the VLS funds. The lower costs were appealing.

However, I've decided to hold off for now after reading so much information on here. I am a safety first investor and am wary of a correction because the IMO market is closer to a peak than a trough and there are a lot of uncertainties on the short term horizon. So I'm holding a big chunk of my portfolio in cash because I am retiring next year. I decided not to switch into things like VLS because a) I'll be buying at a high price and b) like many people have said, they have not been tested through a market correction. So I'm keeping my current investments (which are mostly in active funds) as they are, not switching to VLS or similar. The only new fund I am adding now is the new Woodford income fund (because I like the investment strategy of that fund).

Once I am into retirement I can see myself shifting in 2 to 3 years time into more longer term, lower cost passive funds. Hopefully we will have seen what direction the markets are taking by then, but of course we still won't know for sure what the future holds.

It's good that you are holding a fair bit of cash. Hopefully you'll be able to pick up some bargains soon.

I'm also retired technically (I'm 46) and I use my main portfolio to generate income that is just enough to keep us going. Because my strategy involves always holding a significant amount of cash, it means I don't have to worry about weather the funds I hold are in INC or ACC units. I prefer ACC units in general, but sometimes the INC funds on my platform have lower charges (or lack an initial fee) compared to to the ACC version, so I'm free to pick whichever fund class represents the best deal.

That's another way I've tailored my strategy/portfolio to fit in with my own unique situation and the way my platform functions. Right now it's all working nicely, but it's early days, and only time will tell. It would be nice to have a significant correction soon if only to see how it holds together while under stress.

Glen_Clark

grey_gym_sock wrote: »

it's partly fictional, but mostly misleading by omitting all the context.

it's fictional, in the sense that the outstanding public debt is currently about £400bn less than they say, because they're not deducting the gilts which the BoE is holding. you can't owe debt to yourself, and the BoE is wholly owned by the UK. this fiction is also perpetuated by the government, of course - it's not just that website. but the government does also publish "whole of government" accounts, which show the net debt correctly.

it's also misleading to show debt "per taxpayer", by which they appear (from the numbers) to mean "per income tax payer". only about 28% of tax raised is income tax; a much larger number of people pay taxes altogether.

if you want to answer the question "how big is public debt?", including how it varies over time, you should show the debt-to-GDP ratio, not the debt in £. the debt in £ rises due to inflation and real economic growth. but in any sensible analysis, if the debt-to-GDP ratio remained the same, there'd be no real rise.

the broader context is: there is no reason why public debt should ever be repaid. in fact, trying to repay it would cause huge problems. because we use IOUs from the UK government (read what it says on any bank note) as money, and it would be very inconvenient not to have money.

the broader context is: there is no question of the UK government not being able to pay its debt, because the debt is in £, which are IOUs from UK government, which it can produce as many as it needs to, at will.

the broader context is: interest on UK government debt has no real cost. currently, the interest is actually less than inflation. but in fact, that's not quite necessary for it to have no real cost: it just needs to be less than nominal economic growth (i.e. real growth + inflation). because that ensures that the interest won't make the debt-to-GDP ratio rise.

the alarmism over public debt is simply a smoke-screen peddled by ideologues who want to cut public services and social security. those cuts make no sense: they're cruel, they're unnecessary, they make the economy weaker in the current context (that households are can't spend much without going further into debt; and that businesses aren't investing much), and they aren't even effective at the declared aim of reducing the deficit (as we've seen under osborne/hammond - in reality there has been no change of policy under the latter).

this is all in contrast with household debt. households do need to pay their debt down, because their years of earning from selling their labour will come to an end at some age. households can't just pay their debt at will by writing IOUs. households pay real, sometimes cripplingly high, rates of interest on their debt. high household debt is a real problem (which the government isn't even attempting to solve).

Who needs industry when we can just keep printing money
Sure the Government can print bank notes like lunatics - but what happens when people spend them?
When they are borrowed it only makes it worse.
The excess of household debt is a direct result of Government policy increasing rents, thereby reducing disposable income, but making cheap credit easily available. More short termism to keep the bubble inflated until after the next election.
There are other ways to cut spending than cutting benefits (which tends to increase spending elsewhere - police/courts/prisons/nhs etc) Britain has the highest military spending in Europe for a start. And don't get me started on the size of Government and Monarchy - House of Lords alone bigger than the whole of the EU Parliament for 27 countries.
If the Government stopped intervening in the housing market pushing prices up then housing benefit could be cut with no problem - contrary to the Daily Mail stereotype most housing benefit claimants are in work but their wages don't cover the rent.
The National Debt is actually bigger than figures presented because they don't include off-balance sheet debt like PFI.
Comparing it with GDP is also seriously flawed because GDP is inflated by house prices/rent - which is actually a drain on the productive side of the economy.

EdGasket

bowlhead99 wrote: »

Well, the suggestion is you hold this particular asset on a platform that charges you £12.50 or £0 which is more palatable than 0.25%.

Unless I'm missing something

Yes the money is stuck in a SIPP.

Jon_W

AnotherJoe wrote: »

More to the point, the non-UK shares you bought will rise in £ value. So saying "I'm not investing in "shares" because the UK market might fall" is ignoring the entire ROTW. Surely you weren't contemplating buying only UK shares?

The investment world is a lot bigger than the UK or even Europe. But you are apparently saying "i wont invest because of Brexit" despite the fact that (a) there's 93% left of the globe you can invest in thats not affected directly, eg Apple shares wont rise or fall in $ terms whatever happens with Brexit, and (b) odds are that the other 93% will rise relative to your currency (Pounds) because if Brexit is a bust and the Pound falls as a result, your investments will rise in £ terms.

I don't want to tell you how long it took me to work out that the £ falling against the $ is good for UK people who hold shares in $, but not so good for UK people who want to buy shares in $.

Nor that if the £ rises against the $ that it is not so good for people who hold shares in $ but better for UK people who want to buy shares in $.

Still, I am getting there slowly. Bear in mind 3 weeks ago I knew absolutely nowt. At least now I have a sense of knowing what I don't know and need to know! I find all this difficult to a non-maths and non-business mind, but fascinating. Absolutely fascinating.

Though I won't reserve a table at the Nobel Prize for Economics awards ceremony JUST yet...

badger09

Jon_W wrote: »

I don't want to tell you how long it took me to work out that the £ falling against the $ is good for UK people who hold shares in $, but not so good for UK people who want to buy shares in $.

Nor that if the £ rises against the $ that it is not so good for people who hold shares in $ but better for UK people who want to buy shares in $.

Still, I am getting there slowly. Bear in mind 3 weeks ago I knew absolutely nowt. At least now I have a sense of knowing what I don't know and need to know! I find all this difficult to a non-maths and non-business mind, but fascinating. Absolutely fascinating.

Though I won't reserve a table at the Nobel Prize for Economics awards ceremony JUST yet...

Sounds like you're at stage 2 (almost:p)

http://examinedexistence.com/the-four-states-of-competence-explained/

fairleads

grey_gym_sock wrote: »

it's partly fictional, but mostly misleading by omitting all the context.

it's fictional, in the sense that the outstanding public debt is currently about £400bn less than they say, because they're not deducting the gilts which the BoE is holding. you can't owe debt to yourself, and the BoE is wholly owned by the UK. this fiction is also perpetuated by the government, of course - it's not just that website. but the government does also publish "whole of government" accounts, which show the net debt correctly.

it's also misleading to show debt "per taxpayer", by which they appear (from the numbers) to mean "per income tax payer". only about 28% of tax raised is income tax; a much larger number of people pay taxes altogether.

if you want to answer the question "how big is public debt?", including how it varies over time, you should show the debt-to-GDP ratio, not the debt in £. the debt in £ rises due to inflation and real economic growth. but in any sensible analysis, if the debt-to-GDP ratio remained the same, there'd be no real rise.

the broader context is: there is no reason why public debt should ever be repaid. in fact, trying to repay it would cause huge problems. because we use IOUs from the UK government (read what it says on any bank note) as money, and it would be very inconvenient not to have money.

the broader context is: there is no question of the UK government not being able to pay its debt, because the debt is in £, which are IOUs from UK government, which it can produce as many as it needs to, at will.

the broader context is: interest on UK government debt has no real cost. currently, the interest is actually less than inflation. but in fact, that's not quite necessary for it to have no real cost: it just needs to be less than nominal economic growth (i.e. real growth + inflation). because that ensures that the interest won't make the debt-to-GDP ratio rise.

the alarmism over public debt is simply a smoke-screen peddled by ideologues who want to cut public services and social security. those cuts make no sense: they're cruel, they're unnecessary, they make the economy weaker in the current context (that households are can't spend much without going further into debt; and that businesses aren't investing much), and they aren't even effective at the declared aim of reducing the deficit (as we've seen under osborne/hammond - in reality there has been no change of policy under the latter).

this is all in contrast with household debt. households do need to pay their debt down, because their years of earning from selling their labour will come to an end at some age. households can't just pay their debt at will by writing IOUs. households pay real, sometimes cripplingly high, rates of interest on their debt. high household debt is a real problem (which the government isn't even attempting to solve).

UK finance 101 in a nutshell