Are the Markets Too High to Invest?

EdGasket

ChesterDog wrote: »

That longterm prospect makes the short-term possibilities far less important and far less significant.

The 'longterm' prospect is that you die. Therefore one must not always live for tomorrow but also think short-term.

JohnRo

EdGasket wrote: »

The 'longterm' prospect is that you die. Therefore one must not always live for tomorrow but also think short-term.

What does that mean in reality though, in investment terms?

What if the short term goal is long term financial security?

It reads to me like someone playing a fruit machine, who decides to walk away while they're winning. That's fine but it's not my idea of investing.

And when you've walked away with the loot, then what? Burn through the money on stuff you don't really need or want before inflation does the job for you? Every time a portfolio hits a certain level of gain, syphon off the profit? How will that help compound growth?

If you plan to wait for the proverbial crash to happen, what if it doesn't crash or is it better to view the withdrawal as a lucky escape and never again?

Glen_Clark

Thrugelmir wrote: »

Wrong. Why? Because in May 1997 responsibility for setting rates was passed to the BOE. Politicians could no longer meddle......

Are we expected to believe Carney was independent of Osborne who got him his cushy job?

ChesterDog

EdGasket wrote: »

The 'longterm' prospect is that you die. Therefore one must not always live for tomorrow but also think short-term.

Which is why money that may he needed for things in the short term is not in investments.

Ray_Singh-Blue

TCA wrote: »

What do you make of these below?

https://www.invesco.com/pdf/HYBRR-FLY-1.pdf

https://blog.abglobal.com/post/en/2016/11/why-rising-rates-are-good-for-high-yield-credit

The view that high-yield junk bonds might not be affected as much as investment grade bonds when interest rates rise and might in fact provide an opportunity:

http://www.investopedia.com/articles/investing/020416/effects-rising-interest-rates-junk-bonds.asp

Thanks TCA, an angle I had not considered. To summarise what I got from reading those links: rising interest rates may mean a thriving economy. Risky things may get less risky, investors may not demand such a premium to buy them, so the price may hold up even as the yield drops relative to the risk-free rate?

CharllieSays

I'm invested for another 20 years minimum, so I just drip feed each month and throw in bigger sums when the markets dive (2008, Brexit, etc). I've done ok with that approach so far. I've only ever sold to further diversify. But I'm not really emotionally invested and don't get excited by markets going up or down. If you panic easily then I would say wait for the next dip before you buy in or stick to drip feeding very small amounts that you won't be scared to lose.

TheShape

Having spent the last year building a decent cash fund I've recently had to decide what to do with a small five figure lump sum (the first time I've had the opportunity to do so). Some has been put into p2p. If the rest had all been kept in cash it would be earning 2% interest (then taxed as over PSA). With an intention to invest for 15 years+ I've instead added to my S&S ISA and will add monthly from salary.

jdw2000

kidmugsy wrote: »

There's certainly a case, I'd say, for holding cash in high interest current accounts...

Which ones, namely? They don't exist.

economic

im about 50% cash 50% stocks outside of my own home. feel its a right balnce for now.

jdw2000

Ray_Singh-Blue wrote: »

Some may say we CANNOT return to higher interest rates very quickly as the economic damage would be huge. A year ago, I would have said America CANNOT elect Donald Trump as president, and Britain CANNOT leave the EU, for the same reasons. But I was wrong, and as far as I can see the economic damage has not yet occurred.

I'm not sure that a rise in interest rates will be bad for equities. Interest rates rises will possibly come on the tail of sharp inflation, which could be neutral or positive for the value of many equities.

Historically some periods of high interest rates were also periods of stock market rises - for example 1984 to 1986 when interest rates rose to 14%, and the FTSE100 doubled from 1100 to 2200.

(I think an interest rate rise will clearly, mathematically, be bad for the value of existing bonds though.)

Hence the point of a globally diversified portfolio. UK interest-rate rises will not be an issue unless all/most of your equities/bonds are tied up in the UK.

That's the point of products like VLS.